AS Citadele banka

ANNUAL REPORT

For the year ended

31 December 2022

AS Citadele banka

The Group at a glance

AS Citadele banka Annual report for the year ended 31 December 2022 2

Key figures and events of the Group

Solid financial performance with

growing income in both Q4 and FY

2022. FY 2022 Operating income

(Baltics) reached EUR 168.2 million,

12% growth year over year. Q4

operating income was EUR 46.4

million, 10% growth year over year.

In 2022, the bank issued EUR 1.2

billion in new financing to support

Baltic private, SME and corporate

customers. EUR 231 million were

disbursed in Q4 2022. Baltic

operations profit before impairment

was EUR 76.6 million in 2022, 17%

higher than in 2021. Profit before

impairment in Q4 reached EUR 22.4

million, 15% growth quarter over

quarter.

Taking a prudent approach towards

more uncertain macroeconomic

outlook, the bank has made

provisions in amount of EUR 23.8

million in 2022 (EUR 8.8 million in

Q4) of which vast majority relates to

inflation overlay and collectively

assessed impairment. Underlying

credit quality remains stable and

there are no signs of deteriorating

asset quality.

Baltic operations net profit reached

EUR 50.8 million in 2022, which

translated into 12.4% return on

equity. Q4 net profit from continuous

operations was EUR 13.3 million,

translating into 12.9% return on

equity.

On the back of attractive digital

solutions and services the bank’s

active customers reached an all-time

high of 374 thousand active clients

as of 31 December 2022, 4% growth

year over year.

The deposit base remained stable

and Baltic deposits constituted EUR

3,881 million as of 31 December

2022, or 98% from total deposits.

The Bank continues to operate on

the back of more than adequate

capital and liquidity ratios. Group’s

CAR, transitional (including period’s

result) was 20.1% and LCR of 176%

as of 31 December 2022.

As of 31 December 2022, Citadele

had 1,355 full time employees.

EUR millions

Continuous operations*

2022

2021

2020

Q4`22

Q3`22

Q4`21

Net interest income

118.8

107.0

65.3

35.9

28.9

27.1

Net fee and commission income

37.6

34.1

27.5

7.3

8.9

9.0

Net financial and other income

11.7

8.6

(2.1)

3.2

4.2

1.1

Operating income

168.2

149.7

90.6

46.4

42.1

37.2

Operating expense

(91.6)

(84.1)

(72.5)

(24.0)

(22.7)

(23.0)

Net credit losses and

impairments

(23.8)

(1.6)

(10.5)

(8.8)

(2.3)

(1.5)

Net profit from continuous

operations (after tax)

50.8

62.2

7.1

13.3

16.7

10.3

Return on average assets (ROA)

1.00%

1.33%

0.18%

1.05%

1.31%

0.85%

Return on average equity (ROE)

12.4%

16.8%

2.1%

12.9%

16.4%

10.5%

Cost to income ratio (CIR)

54.45%

56.19%

79.99%

51.8%

53.9%

61.9%

Cost of risk ratio (COR)

0.8%

0.1%

0.7%

1.2%

0.3%

0.2%

Loans to and deposits from the public

EURm

Common equity Tier 1 (CET1) capital ratio, transitional (including period’s

result) and Total capital adequacy ratio (CAR), transitional (including period’s

result)

*Only continuous operations shown. Comparatives restated for discontinued

operations of Kaleido Privatbank AG (Swiss subsidiary bank of the Group) which is

committed for sale and thus excluded from the presented key figures.

1 534

2 695

2 966

3 486

3 674

3 980

44% 73% 75%

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

31 Dec 2020* 31 Dec 2021* 31 Dec 2022*

Loan-to-deposit ratio

Loans

Deposits

22.1%

16.3%

17.5%

26.0%

18.8%

20.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

31 Dec 2020* 31 Dec 2021* 31 Dec 2022*

CET1 capital

ratio

CAR

AS Citadele banka

Contents

AS Citadele banka Annual report for the year ended 31 December 2022 3

CONTENTS

Management report

Letter from the Management

Corporate governance

Statement of Management’s Responsibility

Financial statements

Statement of income

Statement of comprehensive income

Balance sheet

Statement of changes in equity

Statement of Cash Flows

Notes to the financial statements

Auditors’ Report

Other

Other regulatory disclosures

Quarterly statements of income and balance sheets of the Group

Definitions and abbreviations

Rounding and Percentages

Some numerical figures included in these financial statements have been subject to rounding adjustments. Accordingly,

numerical figures shown for the same category presented in different tables may vary slightly, and numerical figures

shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

In these financial statements, certain percentage figures have been included for convenience purposes in comparing

changes in financial and other data over time. However, certain percentages may not sum to 100% due to rounding.

AS Citadele banka

Management report | Letter from the Management

AS Citadele banka Annual report for the year ended 31 December 2022 4

2022 started with a lot of optimism finally coming

out of two years affected by Covid-19 and many of

us were looking forward to some stability. Then

came 24 February, a tragic date marking a new

reality that most of us never thought we would have

to experience. The events we have been through

during the last three years are unprecedented and it

also shows how adaptive and resilient we are. Baltic

region has demonstrated its resilience and ability to

adapt to changing circumstances and resulted in a

stronger economic growth than expected despite

historically high inflation, energy prices and rapid

interest rate increase. Although macroeconomic and

geopolitical uncertainty remains high, the economic

outlook for 2023 now has a more positive outlook

than it did in Q4, but many uncertainties remain.

Johan Åkerblom

CEO and Chairman of the Management Board

Baltic region is strong

2022 has been a turbulent year for

our region. New risks have emerged,

including Russia's invasion of

Ukraine, an energy challenge in

Europe, the highest inflation in 25

years, and rapidly rising interest

rates. These factors have

disproportionately affected the Baltic

region, causing economic growth to

come to a near halt in the second half

of the year. Nevertheless, the Baltic

region has once again demonstrated

its resilience and ability to adapt to

changing circumstances. New

energy suppliers have been found,

natural gas consumption has

decreased by over 30%, and

investments in alternative energy

sources and green transition have

substantially increased. The labour

market in the Baltics remains robust,

with unemployment hovering near

pre-Covid-19 levels, supporting

consumption levels. In Europe

significant energy crisis has been

largely averted, with natural gas

prices plummeting over 75% from

their 2022 peaks. Inflation in the

Baltics appears to have peaked. The

Baltic countries are poised to benefit

from a significant increase in EU-

financed investments from the

recovery and resilience facility, which

will accelerate green investments in

the region and contribute to

economic recovery. Despite the

lingering risks and uncertainties,

such as the impact of rising interest

rates on the real estate market and

lending, the economic outlook for

2023 appears more positive than it

did in 6 months ago.

Innovations and development

In line with our digital strategy, 2022

displayed further progress in offering

improved services and products to

our customer base. KIWIE X smart

card for youth was successfully

launched, card production

outsourcing was finalized which

ensures swift card deliveries and

improved card service quality across

the Baltics. SME digital onboarding

improvements were introduced,

improving customers experience by

ensuring faster remote business

account opening. In Q4 digital

onboarding for SMEs was launched

in Estonia. Now simple 10-minute

process for SME account opening is

available across all Baltic countries,

including possibility to activate

temporary accounts. Consumer

lending digitalization was launched in

full in Estonia, now all three Baltic

countries have digital solution that

allows any customer to apply to the

product instantly. Bank has started

also Factoring product digitalization

with the new solution being launched

in Lithuania.

Klix, the bank’s e-commerce

checkout solution, exceeded 800

merchants, and 10 million

transactions were processed in 2022

with total value of EUR 336 million.

Bank with one of the best

customer service in the Baltics

Our commitment of providing the best

customer service enabled Citadele to

maintain the top position among

banks in the Baltics, according to the

annual mystery shopper survey

conducted by international customer

service evaluation company DIVE.

We are pleased that our efforts are

recognized by Dive and our

customers, and that our service has

earned the 1

place both in Latvia

and Lithuania and Top 3 in Estonia.

Growing client base

The bank continues to attract new

clients and we are proud that a record

number of active customers trust us

with their financial service needs –

reaching 374 thousand clients as of

31 December 2022, 4% growth year

over year. The number of active

Mobile App users was 235 thousand,

a 13% increase year over year.

EUR 1.2 billion issued in new

financing to Baltic private, SME

and corporate customers

We have continued to support the

business community with financing

for growth and expansion. New

financing to our customers reached

EUR 1,203 million in 2022, 8%

increase year over year. EUR 231

million were issued in Q4 2022.

The total loan book as of 31

December 2022 was EUR 2,966

million, 10% higher vs. the year-end

2021.

Overall, the financial standing of our

clients is reassuring, and portfolio

quality continued to improve and the

NPL ratio stood at 2.7% as of 31

December 2022, vs. 3.3% at the end

of 2021.

Strong financial results from

continued operations

Strong financial performance with a

growing income in both Q4 and FY

2022. In 12 months, 2022 operating

income reached EUR 168.2 million,

12% growth year over year. In Q4

operating income was EUR 46.4

million, 10% growth year over year.

Taking a prudent approach towards

more uncertain macroeconomic

outlook, the bank has made

AS Citadele banka

Management report | Letter from the Management

AS Citadele banka Annual report for the year ended 31 December 2022 5

provisions in amount of EUR 23.8

million in 2022 (EUR 8.8 million in Q4)

of which vast majority relates to

inflation overlay and collectively

assessed impairment. Underlying

credit quality remains stable and

there are no signs of deteriorating

asset quality.

Baltic operations net profit reached

EUR 50.8 million in 2022, which

translated into 12.4% return on

equity. Q4 net profit from continuous

operations was EUR 13.3 million,

translating into 12.9% return on

equity.

Customer deposits increased by 4%

vs. the year end 2021 and constituted

EUR 3,980 million as of 31 December

2022.

Loan-to-deposit ratio was 75% as of

31 December 2022, compared to

73% as of year end 2021.

Citadele continues to operate with

adequate capital and liquidity ratios:

CAR, transitional (including period’s

result) increased to 20.1% and LCR

of 176% as of 31 December 2022.

Sustainability

Citadele is committed to developing

our business with long term

perspective and in line with our

environmental, social, and economic

goals. This includes respect for the

natural environment, and responsible

and ethical practices in the decisions

we make, products we offer and

services we provide. We are

committed to support our clients in

the transition to a low-carbon

economy and reduce the negative

impacts on society and the

environment in our own business

activities and operations. 7% of new

financing was disbursed to green

lending in 2022 and is planned to be

doubled in 2023.

In 2022 Citadele has become official

signatory of the UN Principles for

Responsible banking, hence showing

our commitment to continue adapting

the bank’s business strategy to align

and contribute to the UN Sustainable

Development Goals and the Paris

Climate Agreement.

Events in Ukraine and Russian

sanctions

Citadele is closely monitoring the

situation in Ukraine. All new laws,

policies and sanctions, including

sanctions imposed on Russia, are

implemented diligently. Citadele’s

focus is the Baltic region and there is

no direct exposure to Russia, Belarus

or Ukraine. Citadele has not

experienced any material impact

from the recent events in Ukraine or

from Russian sanctions. The indirect

impact from these events is closely

monitored.

Sale of Swiss subsidiary

In January 2022 AS Citadele banka

announced that it has entered into a

binding agreement with Trusted

Novus Bank Limited regarding 100%

sale of its Swiss subsidiary - Kaleido

Privatbank AG. The closing of the

transaction was expected by year

end 2022. Long stop date has been

extended and closing is still pending

subject to regulatory approvals.

AS Citadele banka

Management report | Financial review of the Group

AS Citadele banka Annual report for the year ended 31 December 2022 6

Financial review of the Group

Results and profitability in 2022 – Baltics

Stable financial performance with Q4 2022 operating income

reaching EUR 46.4 million, 25% growth year over year.

Operating income in 12 months 2022 reached EUR 168.2

million, 12% growth year over year.

Performance driven by strong net interest income which

reached EUR 35.9 million in Q4 2022, a 24% increase as

compared to Q3 2022, mainly impacted by rising interest rates.

Net interest income in 2022 was EUR 118.8 million, 11% higher

than in the respective period of 2021, in line with portfolio

growth.

The Group’s net fee and commission income in Q4 2022

reached EUR 7.3 million, which translates into 18% decrease

quarter over quarter, mainly driven by the cautions spending of

customers and lower income from cards. 12 month 2022 net fee

and commissions income reached EUR 37.6 million, 10%

growth year over year.

Operating expenses in Q4 2022 were EUR 24.0 million, or 6%

increase quarter over quarter. Staff costs decreased by 8% to

EUR 13.6 million. The number of full-time employees was 1,355

vs. 1,335 as of 31 December 2021. Other costs were EUR 8.1

million 44% increase quarter over quarter, mainly impacted by

increase of consulting expenses. Depreciation and amortization

expenses stood at EUR 2.3 million (1% increase quarter over

quarter). Year 2022 operating expenses were EUR 91.6 million

vs. EUR 84.1 million in 12 months 2021.

Citadele’s cost to income ratio in Q4 2022 was 51.8% vs.

53.9% in Q3 2022. Year 2022 cost to income ratio was 54.4%.

Taking a prudent approach towards more uncertain

macroeconomic outlook, the bank has made provisions in

amount of EUR 23.8 million in 2022 (EUR 8.8 million in Q4) of

which vast majority relates to inflation overlay and collectively

assessed impairment. Underlying credit quality remains stable

and there are no signs of deteriorating asset quality.

Baltic operations net profit reached EUR 50.8 million in 2022,

which translated into 12.4% return on equity. In Q4 net profit

from continuous operations reached EUR 13.3 million. The

overall credit quality of the loan book continued to improve and

Stage 3 loans to public, gross ratio has decreased to 2.7% as

of 31 December 2022, compared to 3.3% at the end of 2021,

benefiting from a stringent work with non-performing loans.

Net interest income, EURm

Continuing operations

Net fee and commission income, EURm

Continuing operations

Net Financial & other income, EURm

Continuing operations

Operating income, EURm

Continuing operations

Operating expense, EURm

27.1

27.4

26.6

28.9

35.9

67.5

107.0

118.8

Q4`21Q1`22 Q2`22Q3`22Q4`22 2020 2021 2022

9.0

10.3

11.1

8.9

7.3

30.2

34.1

37.6

Q4`21 Q1`22 Q2`22 Q3`22 Q4`22 2020 2021 2022

1.1

1.7

2.6

4.2

3.2

-2.1

8.6

11.7

Q4`21Q1`22Q2`22 Q3`22Q4`22 2020 2021 2022

37.2

39.4

40.3

42.1

46.4

90.6

149.7

168.2

Q4`21Q1`22Q2`22 Q3`22Q4`22 2020 2021 2022

13.9

14.5

16.0

14.8

13.6

50.9

55.3

58.9

7.1

4.3

5.8

5.7

8.1

21.1

20.7

24.0

2.0

2.1

2.2

2.3

8.0

8.1

8.7

Q4`21Q1`22Q2`22 Q3`22Q4`22 2020 2021 2022

Depreciation and amortisation

Other operating expenses

Staff costs

AS Citadele banka

Management report | Financial review of the Group

AS Citadele banka Annual report for the year ended 31 December 2022 7

Balance sheet overview

The Group’s assets stood at EUR 5,404 million as of 31

December 2022 increasing by 7% since 2021 (EUR 5,055

million). As of 31 December 2022, Kaleido Privatbank AG

(currently in the sales process) is presented as discontinued

operations. Continuing operations assets were EUR 5,238

million as of 31 December 2022 (vs. EUR 4,916 million as of

31 December 2021).

The net loan portfolio of continuing operations was EUR

2,966 million as of 31 December 2022, increasing by EUR 265

million (9.8%) from the year end 2021.

New financing in Q4 2022 constituted EUR 230.8 million,

21% decrease as compared to the respective period in 2021.

EUR 60.0 million were issued to private customers, EUR 77.6

million to SMEs and EUR 93.2 million to corporate customers.

In terms of products, EUR 84.3 million were disbursed in

regular (mortgage) loans (22% decrease quarter over

quarter), EUR 136.1 million leasing and factoring (31%

decrease quarter over quarter), and EUR 10.3 million

consumer and micro loans (51% decrease quarter over

quarter). New financing in 2022 reached EUR 1,203 million,

8% increase as compared to year 2021.

In terms of loan portfolio’s geographical profile, Latvia

accounted for 45.6% of the portfolio, with EUR 1,354 million

(vs. 48% as of the year end 2021), followed by Lithuania at

37.8% with EUR 1,122 million (vs. 37% as of the year end

2021) and Estonia at 16.1% with EUR 477 million (vs. 14% as

of the year end 2021). EUR 14 million (0.5% of the portfolio)

was issued to EU and other countries.

Loans to Households represented 44% of the portfolio (vs.

45% as of the year end 2021). Mortgages have increased by

6% since the year end 2021, and constituted EUR 834 million.

Finance leases increased by 14% and reached EUR 350

million. Increase seen also in consumer lending - 29% vs. the

year end 2021 (EUR 92 million). Card lending has slightly

increased by 4% as of year end 2022 and was EUR 58 million.

Overall, the main industry concentrations were Real estate

purchase and management (14% of total gross loans),

Transport and Communications (8%), Manufacturing (7%)

and Trade (7%).

In Q4 2022 Group’s securities portfolio declined by 1.7%

quarter over quarter as planned maturities exceeded amount

of new investments. In 2022 Group’s securities portfolio

declined year over year by 11.6% (6.2% year over year

decrease for bank) as loan portfolio and cash balance

increased. In Q4 largest decreases for Group’s portfolio

occurred in AAA/Aaa and A rated bonds – by EUR 14.8 million

and EUR 11.4 million respectively. In terms of issuers, the

biggest decreases have been government bonds of Latvia

(EUR 12.1 million), government bonds of Germany (EUR 10

million) and other bonds in Sweden (EUR 7.1 million), while

holdings of other bonds in Estonia have increased (EUR 6

million). Over the whole of 2022 largest decreases have been

for government bonds of Latvia (EUR 68.6 million) and

Lithuania (EUR 28.6 million) as well as other securities from

countries classified as other (EUR 41.8 million), Netherlands

(EUR 18.3 million) and multilateral development banks (EUR

13.8 million). Year over year increases have occurred in other

securities from Germany (EUR 16.3 million) and Estonia

(EUR 5.6 million).

The main source of funding, customer deposits of

continuing operations, increased by 4% vs. the year end

2021 and were EUR 3,980 million. Baltic domestic customer

deposits formed 98% of total deposits or EUR 3,881 million

(vs. 94% as of the year end 2021).

Loans and Deposits, EURm

Continuing operations

New financing, EURm

Continuing operations

Balance sheet structure, EURm

Ratings

International credit rating agency Moody's

Investors Service has assigned Baa2 rating with

stable outlook.

The main credit strengths are:

▪ Sound funding and liquidity, underpinned

by a deposit-based funding model with

lower reliance on non-resident funding

▪ Strong capitalization and improving asset

quality

Moody’s

Long term deposit

Baa2

Counterparty risk rating

Baa1/P-2

Short term deposit

P-2

Baseline Credit Assessment

ba1

Adjusted Baseline Credit Assessment

ba1

Outlook:

Stable

Detailed information about ratings can be found on the web

page of the rating agency www.moodys.com

AS Citadele banka

Management report | Segment highlights

AS Citadele banka Annual report for the year ended 31 December 2022 8

Segment highlights

Retail segment

The number of active Retail customers reached a new all-time

high level for Citadele, and primary customers continued to

grow reaching 200 thousand clients as of 31 December 2022,

a 10% increase year over year.

New lending to Retail customers reached EUR 137.6 million in

Q4 2022, compared to EUR 193.7 million in Q3 2022. EUR 60.0

million were issued to private individuals (vs. EUR 104.1 million

in Q3 2022) and EUR 77.6 million to SMEs (vs. EUR 89.5

million in Q3 2022). 2022 new lending to private individuals and

SMEs reached EUR 692.3 million.

Total loans to private individuals and SME customers reached

EUR 1,882 million, 11% increase since the year end 2021 with

good loan quality. Deposits from private individuals and SMEs

increased by 7% vs. the year end 2021 and constituted EUR

2,799 million.

Corporate segment

Corporate new financing in Q4 2022 reached EUR 93.0

million. New financing in 12 months 2022 was EUR 510.8

million. Most active clients were in the real estate

business, manufacturing, trade and transportation sectors.

The total corporate loan portfolio grew by 13% compared to the

year end 2021 and reached EUR 1,061 million. Credit portfolio

quality is stable. The deposit portfolio increased by 10% vs. the

year end 2021 and was EUR 1,057 million as of 31 December

2022.

Loans, EURm

Deposits, EURm

New lending, EURm

Operating income, EURm

1 103

585

940

1 200

630

1 061

Private

retail

Private

affluent

SME Corporate

YE 2021 YE 2022

1 467

527

629

963

1 550

511

737

1 057

Private

retail

Private

affluent

SME Corporate Asset

Mngmt.

YE 2021 YE 2022

130

106

155

132

Private

individuals

Private

affluent

SME Corporate

Q1`22 Q2`22 Q3`22 Q4`22

13.5

1.1

9.6

11.9

13.0

0.7

9.6

11.5

14.4

0.9

11.0

13.4

15.8

0.5

11.7

14.3

Private

individuals

Private

affluent

SME Corporate

Q1`22 Q2`22 Q3`22 Q4`22

AS Citadele banka

Management report | Business environment

AS Citadele banka Annual report for the year ended 31 December 2022 9

Business Environment

Global economic outlook is stabilizing

In 2022, the global economy has faced numerous challenges,

including high inflation and rising interest rates, Russia's

invasion of Ukraine, and the spread of Covid-19 in China. But

despite these challenges, the global economy managed to

avoid a recession and in the second half of the year growth

remained relatively strong.

Although risks remain tilted to the downside and economic

outlook is uncertain, Europe has avoided worst of energy crisis

and prices are falling, unemployment in advanced economies

has decreased, business sentiment is showing signs of

rebounding in some countries. As a result, forecasts have

stabilized and in January 2023 International Monetary Fund

increased forecasted global GDP growth in 2023 by 0.2% to

2.9%.

In the Baltics growth has stalled

Economic growth in the Baltic has fallen faster than in other

parts of the EU and GDP growth slowed to near 0% in second

half of 2022. In Latvia in Q4 GDP remained unchanged while in

Lithuania GDP decreased by 0.4% compared to Q4 2021. In

Estonia in Q3 2022 GDP fell by 2.3% year over year, although

this is partially due to strong base effects coming from a one-off

investments in 2021.

Proximity to war in Ukraine and trade exposure to Russia have

contributed to economic slowdown in the Baltics while high

energy prices and rising global commodity prices have

contributed to inflation that exceeded 20% at the end of 2022.

At the same time energy crisis has been avoided and natural

gas prices in Europe have fallen by more than 75% from 2022

highs, and inflation in the Baltics has likely already peaked.

Business sentiment in the Baltics has also started to improve.

Economic slowdown is affecting most sectors

Slowing GDP growth has affected most sectors of the economy

in the Baltic region and manufacturing has slipped into

recession. In December 2022 manufacturing output in Latvia

declined by 2.6% compared to same period a year ago, while

output fell by 11.5% in Estonia and 10.3% in Lithuania. Waning

of post pandemic surge in demand and rebuilding of inventories

is leading to slowdown in inventory cycle, and new industrial

orders in the Baltics have decreased.

Meanwhile retail sales and consumption has been hit by

inflation which has significantly exceeded income growth

although government support measures have eased burden

from high energy prices. Labour market remains strong in the

Baltics with unemployment in December 2022 falling to 7.1% in

Latvia, 5.8% in Lithuania and 5.7% in Estonia, however raising

interest rates are increasingly impacting real estate market as

new mortgage lending has declined and activity in real estate is

decelerating. However, Baltic countries are set to benefit from

a significant increase in EU financed investments from recovery

and resilience facility that is set to accelerate green investments

in the region and will contribute to economic recovery.

IHS Markit Composite PMI

(Values above 50 indicate expansion)

GDP (constant prices, 2015=100)

Inflation (%, year-on-year)

Retail trade in Baltics excl. fuel (2015=100)

2007 2009 2011 2013 2015 2017 2019 2021 2023

Euro area

China

-15

-10

-5

2014 2015 2016 2017 2018 2019 2020 2021 2022

Estonia

Latvia

Lithuania

Euro area

-10%

10%

20%

30%

2004 2007 2010 2013 2016 2019 2022

Estonia

Latvia

Lithuania

Euro area

100

110

120

2004 2007 2010 2013 2016 2019 2022

Estonia

Latvia

Lithuania

Euro area

AS Citadele banka

Management report | Other regulatory information

AS Citadele banka Annual report for the year ended 31 December 2022 10

OTHER REGULATORY INFORMATION

Name

AS Citadele banka

Address

Republikas laukums 2A, Riga,

LV-1010, Latvia

Web page

www.citadele.lv

www.cblgroup.com

Phone

(371) 67010 000

LEI code

2138009Y59EAR7H1UO97

Registration number

40103303559

Licence number

06.01.05.405/280

Licence issue date

30/06/2010

Branches

AS Citadele banka has 15 branches and client service

centres in Latvia, 1 branch in Estonia and 1 branch in

Lithuania as of the period end. The Lithuanian branch has

6 customer service units in Lithuania.

Information about branches, client service centres and

ATMs of Citadele is available in the Citadele web page's

section “Branches and ATMs”.

Dividends

Refer to Note 27 (Share Capital) of the annual report. As at

issuance of the annual report the Management proposes

to transfer the Bank’s earnings for 2022 to the retained

earnings account to strengthen the capital position.

Future development

Citadele aims to become the primary bank of choice for

aspiring retail and small business customers across the

Baltics and will continue to relentlessly improve products

and services. Citadele will continue to provide high quality

financial services to clients and their businesses with an

objective to foster further growth across the whole Baltic

region. A complete portfolio of banking, leasing, financial

and wealth management services is to be offered for both

private individuals and companies. The core market of

Citadele remains unchanged: Latvia, Lithuania and

Estonia.

Risk management

The main risks to which the Group is exposed are credit

risk, market risk, interest rate risk, liquidity risk, currency

risk and operational risk. For each of these risks the Group

has approved risk management policies and other internal

regulations defining key risk management principles and

processes, functions and responsibilities of units, risk

concentration limits, as well as control and reporting

system. The Group’s risk management policies for each of

the above-mentioned risks and certain other risks are

briefly summarised in the Note 35 (Risk Management) of

these financial statements.

Domicile of entity

Latvia

Country of

incorporation

Latvia

Legal form

Stock company (in Latvian “Akciju sabiedrība”)

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 11

CORPORATE GOVERNANCE

AS Citadele banka is the parent company of Citadele Group. AS Citadele banka is a joint stock company. Approximately

75% of shares in AS Citadele banka are owned by a consortium of international investors represented by Ripplewood

Advisors LLC. The European Bank for Reconstruction and Development (EBRD) owns approximately 25% of shares in

AS Citadele banka.

The Statement of Corporate Governance is published on the Bank’s website www.cblgroup.com.

Audit and Governance Committee’s report to the shareholders

In 2022 Audit and Governance Committee of AS Citadele banka (hereinafter – the Committee) acted in the role of audit

committee as required by the Financial Instruments Market Law.

The Committee performed tasks in line with the requirements of the law:

- Supervised the preparation of the annual report for the year ended 31 December 2022;

- Supervised the process of audit of the annual report for the year ended 31 December 2022;

- Supervised the effectiveness of internal controls, risk management and internal audit systems as applicable to

the process of the preparation of financial statements;

- Supervised the approval of the external auditor for audit of the annual report for the year ended 31 December

2022;

- Supervised the compliance of the auditor of the annual report for the year ended 31 December 2022 with

independence and objectivity requirements set forth in the Law of the Provision of Audit Services;

- Communicated to the Supervisory Board the conclusions made by the auditor of the annual report for the year

ended 31 December 2022.

In 2022 the Committee was not hindered in any way, and full access to any information required by the Committee was

ensured. The Committee throughout the year kept the Management Board and the Supervisory Board informed about

the conclusions and recommendations made by it. In the course of discharging its duties as related to the preparation of

the annual report for the year ended 31 December 2022 the Committee did not encounter any evidence that would

suggest that these financial statements would not be true and fair.

A detailed report on the activities of the Committee in 2022 has been submitted to the Supervisory Board of the Bank.

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 12

Supervisory Board of the Bank as of 31/12/2022:

Name

Current Position

Date of

first appointment

Timothy Clark Collins

Chairman of the Supervisory Board

20 April 2015

Elizabeth Critchley

Deputy Chairperson of the Supervisory Board

20 April 2015

James Laurence Balsillie

Member of the Supervisory Board

20 April 2015

Dhananjaya Dvivedi

Member of the Supervisory Board

20 April 2015

Lawrence Neal Lavine

Member of the Supervisory Board

20 April 2015

Klāvs Vasks

Member of the Supervisory Board

30 June 2010

Nicholas Dominic Haag

Member of the Supervisory Board

19 December 2016

Karina Saroukhanian

Member of the Supervisory Board

19 December 2016

Sylvia Yumi Gansser Potts

Member of the Supervisory Board

29 October 2018

There were no changes in the Supervisory Board of the Bank in the reporting period.

Timothy Clark Collins, Chairman of the Supervisory Board

Mr. Collins is the Chief Executive Officer of Ripplewood. Mr. Collins has led the

Ripplewood team in investing around the globe, including in the U.S., Europe, the Middle

East and Asia. Mr. Collins and Ripplewood have delivered outsized returns, deploying

over USD 6 billion in equity, representing over USD 40 billion of total enterprise value,

and played an instrumental role in transforming and strengthening two prominent

institutions, Commercial International Bank of Egypt and Shinsei Bank of Japan. Before

founding Ripplewood in 1995, Mr. Collins worked for Cummins Engine Company, Booz,

Allen & Hamilton, Lazard Frères & Company and Onex Corporation. Mr. Collins is

involved in several not-for-profit and public sector activities, including the Trilateral

Commission, the Council on Foreign Relations, Neom Advisory Board and Yale Divinity

School Advisory Board, is the Chairman of the Advisory Board for Yale School of

Management and is a member of the Investment Advisory Committee to the New York

State Common Retirement Fund. Mr. Collins has served on a number of public company

boards, including Asbury Automotive, Shinsei Bank of Japan, Advanced Auto, Rental

Services Corp., Commercial International Bank of Egypt, Gogo and Citigroup (after it

accepted public funds). Mr. Collins also served as an independent director at Weather

Holdings, a large private emerging markets telecom operator. Mr. Collins currently

represents Ripplewood on the Boards of Citadele (Latvia) and RA Special Acquisition

Corporation. Mr. Collins has a BA in Philosophy from DePauw University and a MBA in

Public and Private Management from Yale University's School of Management. Mr.

Collins received an honorary Doctorate of Humane Letters from DePauw University in

2004 and has been an Adjunct Professor and Visiting Fellow at New York University.

He serves as a Visiting Lecturer at the Yale Law School and the Senior Becton Fellow

at the Yale School of Management.

Elizabeth Critchley, Deputy Chairperson of the Supervisory Board

Ms. Critchley is the Managing Partner of Ripplewood Advisors I LLP. Ms. Critchley has

been leading Ripplewood's investment efforts, including most recently into Eastern

Europe and the Middle East. Ms. Critchley serves as a Director on the Board of Citadele

(Latvia) and RA Special Acquisition Corporation. Before joining Ripplewood, Ms.

Critchley was a Founding Partner of Resolution Operations, which raised GBP 660

million through a listed vehicle at the end of 2008, and went on to make three

acquisitions in financial services (Friends Provident plc for USD 2.7 billion, most of Axa's

UK life businesses for USD 4 billion and Bupa for USD 0.3 billion). This consolidation

strategy was financed through a combination of debt and equity raisings, as well as

structured vendor financing. Until forming Resolution Operations, Ms. Critchley was a

Managing Director at Goldman Sachs International where she ran the European FIG

Financing business. Ms. Critchley has structured, advised, or invested in transactions

with more than fifty global financials and corporates. Ms. Critchley holds a First Class

Honours Degree in Mathematics from University College London.

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 13

James Laurence Balsillie, Member of the Supervisory Board

Mr. Balsillie's career is unique in Canadian business. He is the retired Chairman and co-

CEO of Research In Motion (BlackBerry), a technology company, he scaled from an

idea to USD 20 billion in sales globally. Mr. Balsillie's private investment office includes

global and domestic technology investments such as cybersecurity leader Magnet

Forensics and space technology leader MDA. He is the co-founder of the Institute for

New Economic Thinking in New York, the Council of Canadian Innovators based in

Toronto, and CIO Strategy Council, as well as founder of the Centre for International

Governance Innovation in Waterloo, the Centre for Digital Rights, the Balsillie School of

International Affairs, and the Arctic Research Foundation. He currently chairs the boards

of CCI, CIGI, Innovation Asset Collective (Canada's IP Collective) and co-Chairs

CIOSC. He is also a member of the Board of the Carnegie Endowment for International

Peace and the Advisory Board of the Stockholm Resilience Centre; an Honorary Captain

(Navy) of the Royal Canadian Navy and an Advisor to Canada School of Public Service.

Mr. Balsillie was the only Canadian ever appointed to US Business Council and was the

private sector representative on the UN Secretary General's High Panel for

Sustainability. His awards include: several honorary degrees, Mobile World Congress

Lifetime Achievement Award, India's Priyadarshni Academy Global Award, Canadian

Business Hall of Fame, Time Magazine's World's 100 Most Influential People and three

times Barron's list of "World's Top CEOs". Mr. Balsillie holds a Bachelor of Commerce

from the University of Toronto, an MBA from Harvard Business School, and is a Fellow

of the Institute of Chartered Accountants Ontario.

Dhananjaya Dvivedi, Member of the Supervisory Board

Mr. Dhananjaya Dvivedi headed the Banking Infrastructure Group and was the

Corporate Executive Officer of Shinsei Bank from 2000 to 2010. Mr. Dvivedi was

instrumental in transforming Shinsei's IT platform as part of its strategy to improve

customer service with conveniences such as internet banking, 24-hr ATMs, managed

and monitored remotely, and real-time data, while maintaining cost control. Mr. Dvivedi

has also served as the External Director of SIGMAXYZ Inc. from 2008 until 2011 and

has since been involved in various research and advisory capacities for the development

of new technologies to benefit society. Mr. Dvivedi holds an engineering degree from

the Madhav College of Engineering in India and an MBA from the Indian Institute of

Management.

Lawrence Neal Lavine, Member of the Supervisory Board

Mr. Lavine is a Senior Managing Director of Ripplewood Advisors LLC, following a 28

year career in investment banking. At Ripplewood Advisors LLC, Mr. Lavine has focused

primarily on companies in the financial services and telecommunications industries. Mr.

Lavine was previously a Managing Director of Credit Suisse First Boston in its Mergers

and Acquisitions Group. He joined Credit Suisse First Boston in 2000 as part of the

acquisition of Donaldson, Lufkin & Jenrette where he had been a Managing Director in

Mergers and Acquisitions since 1987. He started his career on Wall Street at Kidder

Peabody & Co. in 1976. Mr. Lavine holds a BS from Northeastern University and an

MBA from Harvard Business School.

Klāvs Vasks, Member of the Supervisory Board

Mr. Vasks served as Chairman of Citadele Supervisory Board from 2010 until 2015 and

now continues to be member of the Supervisory Board. He is currently serving as

Chairman of the Supervisory Board at TET, the largest telecommunication company in

Latvia. He has 20 years of experience in the banking sector. Previously he was vice

president of the SEB Bank Latvia, also working as the director of the Restructuring

Department and Large Company Services Department. From 2010 to 2015, he chaired

the Latvian Guarantee Agency. Mr. Vasks holds a bachelor's degree from the Banking

University College and an MBA degree from the Rīga School of Business of the Rīga

Technical University.

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 14

Nicholas Haag, Member of the Supervisory Board

Mr. Haag until June 2021 was senior independent non-executive director (INED) and

chairman of the audit committee of TBC Bank Group PLC, the largest Georgian bank

and the premium listed FTSE 250 company. He is chairman of the Board, an INED and

chairs the audit, risk and compliance committee of Bayport Management Ltd., the

holding company for a leading African and Latin American financial solutions provider

Prior to that, he was a Member of the Supervisory Board of Credit Bank of Moscow

PJSC. Mr. Haag has a 30 year banking career, half at Managing Director level, with

various financial institutions including Barclays, Banque Paribas, ABN AMRO and Royal

Bank of Scotland, specialising in technology finance and equity capital markets. Mr.

Haag holds a First Class Honours Degree from the University of Oxford.

Karina Saroukhanian, Member of the Supervisory Board

Ms. Saroukhanian is a Managing Director of Ripplewood Advisors Limited. Before

joining the company, from 2008, she worked as senior banker in the Financial

Institutions team of EBRD. At EBRD, she specialized in complex equity transactions,

working with financial sponsors in multiple jurisdictions. Prior to joining the EBRD, Karina

was an Associate Director in the M&A group at Nomura International in London and a

Vice President at Sindicatum, a specialist financial advisory and asset management

firm. Karina holds an MSc in Economics from the London School of Economics and a

degree in mathematical economics from the Moscow State University

Sylvia Gansser-Potts, Member of the Supervisory Board

Sylvia Gansser-Potts is a Director and member of the audit and risk committee of the

European Fund for Southeast Europe (EFSE) which provides development finance to

micro and small enterprises and private households via selected financial institutions.

Until 2017, Sylvia was a Managing Director at the EBRD with the overall responsibility

for EBRD's investments and operations in Central and Southeastern Europe. Over her

25 year career at the EBRD, Sylvia run a succession of banking teams including the

financial institutions operations in Central Europe, in MENA/Turkey as well as the

property and tourism team. Sylvia started her career at Swiss Bank Corporation (which

later merged to become UBS) in Switzerland and Japan. She holds a master's in

business from the Université Paris Dauphine -PSL, a bachelor's degree in Japanese

language from the University of Paris and an MBA from INSEAD

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 15

Management Board of the Bank as of 31/12/2022:

Name

Current position

Responsibility

Johan Åkerblom

Chairman of the Management Board

Chief Executive Officer

Valters Ābele

Member of the Management Board

Chief Financial Officer

Vladislavs Mironovs

Member of the Management Board

Chief Strategy Officer

Uldis Upenieks

Member of the Management Board

Chief Compliance Officer

Slavomir Mizak

Member of the Management Board

Chief Technology and Operations Officer

Vaidas Žagūnis

Member of the Management Board

Chief Corporate Commercial Officer

Rūta Ežerskienė

Member of the Management Board

Chief Retail Commercial Officer

Jūlija Lebedinska-Ļitvinova

Member of the Management Board

Chief Risk Officer

There were no changes in the Management Board of the Bank in the reporting period.

Johan Åkerblom, Chairman of the Management Board and Chief Executive Officer

Johan Akerblom is Chairman of the Management Board, Chief Executive Officer as of

October 2020. Johan joined AS Citadele banka Management Board on February 2018

and was responsible for the financial functions of the group. Before joining the Bank, he

worked for SEB group as Chief Financial Officer for its Baltic business division in 2016

and 2017 and prior to that Johan Akerblom was Chief Financial Officer and member of

the Management Board of SEB AG, SEB group’s German subsidiary. He has more than

10 years of banking experience and started his career as a management consultant with

McKinsey & Co where he spent 4 years. Mr. Åkerblom holds a master’s degree in

industrial management and engineering from the Lund Institute of Technology. Member

of the Management Board since 1 February 2018, Chairman of the Management Board,

CEO from 2 March 2020.

Valters Ābele, Member of the Management Board and Chief Financial Officer

Valters Ābele is responsible for the group’s Finance and Treasury functions as of

January 2021. Until January 2021 Valters Ābele has been responsible for risk analysis

functions at AS Citadele banka and ran the Risk Department. Previously Valters

managed the Credit Risk Department at Parex banka. In December 2008, when the

Latvian State took over Parex banka, Valters Ābele was invited to work in the new Board

of the bank, and after the successful split-up, he assumed the same post in the Board

of Citadele. Valters Ābele has acquired extensive experience in auditing and financial

consulting at companies such as Ernst & Young and Arthur Andersen. He is a member

of Latvian Association of Sworn Auditors and previously a member of Association of

Chartered Certified Accountants. Valters Ābele has master’s degree in business

management and international economic relations from the University of Latvia. He was

appointed to the management board of Parex in 2008 and joined Citadele's

Management Board in 2010.

Vladislavs Mironovs, Member of the Management Board and Chief Strategy Officer

Vladislavs Mironovs is responsible for group’s business strategy implementation,

development of the Bank’s products and services and Bank’s digital evolution. He joined

AS Citadele banka in July 2015 as Head of Strategic projects and from December 2016

until January 2021 was Chief Commercial Officer, Member of the Management Board.

His former experience includes various positions in GE Money Bank. The last two years

before joining Citadele, he worked as Strategic Initiatives Leader in GE Capital HQ in

USA, leading the projects and assisting in developing global strategy around trade

finance and multinational clients. Vladislavs Mironovs held a position of Business

Development Manager in GE Capital, UK (2012-2013) and Sales and Marketing Director

in GE Money Bank Latvia (2010-2012). Vladislavs Mironovs holds Executive MBA from

Riga Business School.

Uldis Upenieks, Member of the Management Board and Chief Compliance Officer

Uldis Upenieks in Citadele group is responsible for the Compliance area. Uldis has 20

years’ experience in the financial sector, of which last 15 years he has worked in the

banking sector. Since November 2012 Uldis was a Chairman of the Board at IPAS CBL

Asset Management. Before that Uldis Upenieks worked in PrivatBank – as a Board

member and as a head of internal audit. Prior to that Uldis was responsible for client

oversight function (2002-2009), and a vice president and the deputy director of the Risk

and Compliance Sector (2009-2011) at Citadele. Uldis Upenieks holds a master’s

degree in business administration and a bachelor’s degree in economics from the Riga

Technical University and he has studied at Riga Graduate School of Law.

AS Citadele banka

Management report | Corporate governance

AS Citadele banka Annual report for the year ended 31 December 2022 16

Slavomir Mizak, Member of the Management Board and Chief Technology and Operations Officer

Slavomir Mizak is responsible for group’s IT and technology operations and

development, as well as administrative services and bank operations at Citadele. In

Citadele group he has been working since 1 August 2017. Before joining the bank,

Slavomir was a member of the Management Board and held a position of the Chief

Information Officer and the Chief Operating Officer in Zuno Bank AG (Austria) since

2014. Prior to that, he held positions of the Head of Information Technology and the

Head of Information Technology Development in Zuno Bank. Before that he worked as

a consultant and manager in the consulting division for financial services sector in

Accenture (2002-2009). Slavomir Mizak holds a master’s degree in Business

Administration from the University of Economics in Bratislava.

Vaidas Žagūnis, Member of the Management Board and Chief Corporate Commercial Officer

Vaidas Žagūnis is responsible for the development and management of corporate

business in Citadele Baltics. Vaidas has been working in the banking sector for almost

18 years. He started in 2001 with client executive assistant position in SEB Bank in

Lithuania, and then took different management positions mainly in SME business area.

Since September 2016 Vaidas Žagūnis served as a Member of the Management board

and Executive Vice President of SEB Bank in Lithuania, as a Head of Retail Banking.

Vaidas holds a Master’s degree in business administration from the Kaunas University

of Technology, and also has educated in Massachusetts Institute of Technology (MIT)

in United States.

Rūta Ežerskienė, Member of the Management Board and Chief Retail Commercial Officer

Rūta Ežerskienė is responsible for services to retail clients, as well as organisation and

supervision of the operations of the Bank’s branches, client service centres and

settlement groups. She joined AS Citadele banka (hereinafter– Citadele) in January

2021. Rūta most recently was Head of Baltic Retail for AON insurance company since

2018. Before that she held different management positions in SEB, both on Baltic level

and in Lithuania, including Head of Sales Department and Business transformation

(years 2017-2018) and CEO in SEB Life Insurance (years 2015-2017). Rūta Ežerskienė

holds Master of Business Management degree from Kaunas University of Technology.

Jūlija Lebedinska-Ļitvinova, Member of the Management Board and Chief Risk Officer

Jūlija Lebedinska-Ļitvinova is responsible for the group’s risk management area as of

June 2021. Jūlija Lebedinska-Ļitvinova has an extensive experience of more than 15

years in risk management area in financial sector. Before joining the Bank, Jūlija was

Group Chief Risk Officer for Mogo Finance (since 2019). Prior to that she held Chief

Risk Officer’s position in 4Finance Group (2015-2019), Head of Antifraud and Risk

processes position in Home Credit and Finance Bank in Russia (2013-2015) and Chief

Risk Officer’s position in Home Credit Bank in Belarus (2011-2013). Jūlija Lebedinska-

Ļitvinova has a PhD degree in natural sciences from the University of Latvia.

AS Citadele banka

Statements of the Management’s responsibility

AS Citadele banka Annual report for the year ended 31 December 2022 17

STATEMENT OF MANAGEMENT’S RESPONSIBILITY

The Management of AS Citadele banka (hereinafter – the Bank) is responsible for the preparation of the financial

statements of the Bank and for the preparation of the consolidated financial statements of the Bank and its subsidiaries

(hereinafter – the Group).

The financial statements set out on pages 18 to 78 are prepared in accordance with the source documents and present

the financial position of the Bank and the Group as of 31 December 2022 and the results of their operations, changes in

shareholders’ equity and cash flows for the year then ended. The management report set out on pages 4 to 16 presents

fairly the financial results of the reporting period and future prospects of the Bank and the Group.

The financial statements are prepared on a going concern basis in accordance with International Financial Reporting

Standards as adopted by the European Union. Appropriate accounting policies have been applied on a consistent basis.

Prudent and reasonable judgments and estimates have been made by the Management in the preparation of the financial

statements.

The Management of AS Citadele banka is responsible for the maintenance of proper accounting records, the

safeguarding of the Group’s assets and the prevention and detection of fraud and other irregularities in the Group. They

are also responsible for operating the Bank in compliance with the Law on Credit Institutions, regulations of the Financial

and Capital Market Commission and other legislation of the Republic of Latvia and European Union applicable for credit

institutions.

Johan Åkerblom

Chairman of the Management Board

Klāvs Vasks

Member of the Supervisory Board

THE DOCUMENT IS SIGNED USING A QUALIFIED ELECTRONIC SIGNATURE AND CONTAINS A TIMESTAMP

AS Citadele banka

Financial statements | Statement of income

AS Citadele banka Annual report for the year ended 31 December 2022 18

STATEMENT OF INCOME

EUR thousands

2022

2021

2022

2021

Note

Group

Restated

discontinued

operations

Bank

Interest income calculated using the effective

interest method

91,368

76,686

115,716

93,458

Other interest income

46,088

45,952

Interest expense

(18,607)

(15,659)

(18,489)

(14,994)

Net interest income

118,849

106,979

97,227

78,464

Fee and commission income

66,028

57,984

60,381

49,720

Fee and commission expense

(28,382)

(23,846)

(27,918)

(23,397)

Net fee and commission income

37,646

34,138

32,463

26,323

Net financial income

8,603

6,787

10,123

6,682

Net other income / (expense)

3,077

1,827

7,265

1,782

Operating income

168,175

149,731

147,078

113,251

Staff costs

(58,871)

(55,309)

(49,370)

(45,900)

Other operating expenses

(23,975)

(20,711)

(21,095)

(18,760)

Depreciation and amortisation

(8,729)

(8,120)

(8,309)

(7,616)

Operating expense

(91,575)

(84,140)

(78,774)

(72,276)

Profit before impairment

76,600

65,591

68,304

40,975

Net credit losses

(23,704)

(1,418)

(26,179)

(11,742)

Other impairment losses and other provisions

(68)

(198)

210

941

Operating profit from continuous

operations

52,828

63,975

42,335

30,174

Result from non-current assets held for sale

and discontinued operations, net of tax

(4,205)

(7,365)

286

(213)

Operating profit

48,623

56,610

42,621

29,961

Income tax

(2,318)

(1,565)

(438)

(318)

Net profit

46,305

55,045

42,183

29,643

Basic earnings per share in EUR

0.29

0.35

0.27

0.19

from continuing operations

0.32

0.40

0.27

0.19

from discontinued operations

(0.03)

(0.05)

Diluted earnings per share in EUR

0.29

0.35

0.27

0.19

from Continuing operations

0.32

0.39

0.27

0.19

from discontinued operations

(0.03)

(0.04)

The notes on pages 23 to 78 are an integral part of these financial statements.

AS Citadele banka

Financial statements | Statement of comprehensive income

AS Citadele banka Annual report for the year ended 31 December 2022 19

STATEMENT OF COMPREHENSIVE INCOME

EUR thousands

2022

2021

2022

2021

Group

Bank

Net profit

46,305

55,045

42,183

29,643

Other comprehensive income items that are or may be

reclassified to profit or loss:

Fair value revaluation from continuing operations

Fair value revaluation charged to statement of income

(Note 7)

1,519

(428)

1,519

(428)

Change in fair value of debt securities and similar

(22,023)

(2,931)

(17,610)

(2,349)

Fair value revaluation from discontinued operations

Fair value revaluation charged to statement of income

(114)

Change in fair value of debt securities and similar

(1,861)

(786)

Deferred income tax charged / (credited) directly to

equity

424

212

Other reserves

Foreign exchange retranslation from discontinued

operations

1,134

667

Other comprehensive income items that may not be

reclassified to profit or loss:

Fair value revaluation reserve

Change in fair value of equity and similar instruments

(42)

Transfer to retained earnings at disposal

Other comprehensive income / (loss)

(20,687)

(3,372)

(16,067)

(2,770)

Total comprehensive income

25,618

51,673

26,116

26,873

The notes on pages 23 to 78 are an integral part of these financial statements.

AS Citadele banka

Financial statements | Balance sheet

AS Citadele banka Annual report for the year ended 31 December 2022 20

BALANCE SHEET

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Note

Group

Bank

Assets

Cash and cash balances at central banks

532,030

371,025

532,030

361,626

Loans to credit institutions

48,441

58,742

42,044

35,693

Debt securities

1,592,603

1,801,720

1,550,301

1,652,308

Loans to public

2,966,478

2,701,509

2,880,101

2,609,713

Equity instruments

1,029

1,279

1,029

1,279

Other financial instruments

28,473

42,032

1,101

7,400

Derivatives

1,285

4,303

1,285

4,303

Investments in related entities

190

279

47,770

77,087

Tangible assets

15,730

20,444

10,321

11,496

Intangible assets

8,162

8,562

6,069

6,083

Current income tax assets

1,822

1,927

1,116

871

Deferred income tax assets

2,478

2,676

2,179

Discontinued operations and non-current assets

held for sale

166,028

946

13,827

946

Other assets

39,530

39,117

30,680

28,912

Total assets

5,404,279

5,054,561

5,119,853

4,799,896

Liabilities

Deposits from credit institutions and central banks

469,736

479,235

473,399

499,628

Deposits and borrowings from customers

3,980,261

3,813,863

3,973,320

3,665,524

Debt securities issued

259,225

258,895

259,225

258,895

Derivatives

7,650

739

7,650

739

Provisions

4,920

3,934

4,838

3,882

Current income tax liabilities

1,204

197

189

Deferred income tax liabilities

375

376

Discontinued operations

158,999

Other liabilities

97,691

100,247

28,183

25,476

Total liabilities

4,980,061

4,657,486

4,746,648

4,454,333

Equity

Share capital

157,258

156,888

157,258

156,888

Reserves and other capital components

(12,378)

7,320

(12,951)

2,127

Retained earnings

279,338

232,867

228,898

186,548

Total equity

424,218

397,075

373,205

345,563

Total liabilities and equity

5,404,279

5,054,561

5,119,853

4,799,896

Off-balance sheet items

Guarantees and letters of credit

50,407

34,265

60,936

38,863

Financial commitments

306,690

387,943

322,211

431,065

The notes on pages 23 to 78 are an integral part of these financial statements.

AS Citadele banka

Financial statements | Statement of changes in equity

AS Citadele banka Annual report for the year ended 31 December 2022 21

STATEMENT OF CHANGES IN EQUITY

Group, EUR thousands

Issued

capital

premium

Securities

fair value

revaluation

reserve

(Note 15)

Foreign

currency

retrans-

lation

based

payments

Retained

earnings

Total

equity

Balance as of 31/12/2020

156,556

4,247

4,138

1,880

177,489

344,310

Share based payments to employees

(Note 9 and Note 27)

332

239

238

283

1,092

Total comprehensive income

(4,089)

667

55,095

51,673

Net result for the period

55,045

Other comprehensive income / (loss)

for the period

(4,089)

667

(3,372)

Balance as of 31/12/2021

156,888

239

158

4,805

2,118

232,867

397,075

Share buyback

(94)

(144)

(238)

Share based payments to employees

(Note 9 and Note 27)

464

349

784

166

1,763

Total comprehensive income

(21,821)

1,134

46,305

25,618

Net profit for the period

46,305

Other comprehensive income / (loss)

for the period

(21,821)

1,134

(20,687)

Balance as of 31/12/2022

157,258

444

(21,663)

5,939

2,902

279,338

424,218

Bank, EUR thousands

Issued

capital

premium

Securities

fair value

revaluation

reserve

(Note 15)

based

payments

Retained

earnings

Total

equity

Balance as of 31/12/2020

156,556

2,589

1,880

156,574

317,599

Share based payments to employees

(Note 9 and Note 27)

332

239

238

282

1,091

Total comprehensive income

(2,819)

29,692

26,873

Net result for the period

29,643

Other comprehensive income / (loss)

for the period

(2,819)

(2,770)

Balance as of 31/12/2021

156,888

239

(230)

2,118

186,548

345,563

Share buyback

(94)

(144)

(238)

Share based payments to employees

(Note 9 and Note 27)

464

349

784

167

1,764

Total comprehensive income

(16,067)

42,183

26,116

Net profit for the period

42,183

Other comprehensive income / (loss)

for the period

(16,067)

Balance as of 31/12/2022

157,258

444

(16,297)

2,902

228,898

373,205

The notes on pages 23 to 78 are an integral part of these financial statements.

AS Citadele banka

Financial statements | Statement of cash flows

AS Citadele banka Annual report for the year ended 31 December 2022 22

STATEMENT OF CASH FLOWS

EUR thousands

2022

2021

2022

2021

Note

Group

Bank

Operating activities

Operating profit before tax (discontinued net of tax and

continuing)

48,623

56,610

42,621

29,961

Tax expense from discontinued operations

Interest income

(139,332)

(123,974)

(115,716)

(93,458)

Interest expense

18,655

15,890

18,489

14,994

Dividends income

(29)

(37)

(8,713)

(37)

Depreciation and amortisation

9,411

8,773

8,309

7,616

Impairment allowances and provisions

23,772

1,811

25,969

10,801

Currency translation and other non-cash items

3,006

10,833

186

1,144

Cash flows from the income statement

(35,891)

(30,062)

(28,855)

(28,979)

(Increase) / decrease in loans to public

(324,855)

(368,860)

(291,139)

(1,107,707)

Increase / (decrease) in deposits and borrowings from

customers

323,778

144,966

308,265

189,996

(Increase) / decrease in loans to credit institutions

(1,287)

(1,526)

(1,303)

(1,509)

Increase / (decrease) in deposits from central banks and

credit institutions

(11,000)

29,922

(19,147)

22,763

(Increase) / decrease in other items at fair value through

profit or loss

9,929

(6,551)

9,929

(6,551)

(Increase) / decrease in other assets

(1,621)

352

(672)

(9,189)

Increase / (decrease) in other liabilities

(75)

19,138

3,149

833

Cash flows from operating activities before interest and

corporate income tax

(41,022)

(212,621)

(19,773)

(940,343)

Interest received

137,722

119,940

114,169

90,094

Interest paid

(13,754)

(14,437)

(13,569)

(13,521)

Corporate income tax paid

(1,014)

(787)

(839)

(237)

Cash flows from operating activities

81,932

(107,905)

79,988

(864,007)

Investing activities

Acquisition of tangible and intangible assets

(5,795)

(22,616)

(4,510)

(4,676)

Disposal of tangible and intangible assets

1,468

1,391

329

403

Investments in debt securities and other financial

instruments

(219,342)

(387,513)

(213,777)

(367,520)

Proceeds from debt securities and other financial

instruments

327,006

349,587

302,587

288,074

Dividends received

8,713

Decrease in cash and cash equivalents as a result of

acquisition of SIA UniCredit Leasing

(798,550)

Sale or investments in subsidiaries

15,711

(29,203)

Cash flows from investing activities

103,366

(857,664)

109,053

(112,885)

Financing activities

Proceeds from issue of debt securities

238,251

Repayment of debt securities

(40,000)

Interest paid on debt securities issued

(6,821)

(3,670)

(6,821)

(3,670)

Share buyback

(238)

Repayment of lease liabilities, net

(938)

(1,219)

(653)

(2,220)

Cash flows from financing activities

(7,997)

193,362

(7,712)

192,361

Cash flows for the period

177,301

(772,207)

181,329

(784,531)

Cash and cash equivalents at the beginning of the period

404,343

1,176,550

363,666

1,148,197

Cash and cash equivalents at the end of the period

581,644

404,343

544,995

363,666

The Group has elected to present a statement of cash flows that includes both continuing and discontinued operations within operating,

investing and financing activities. For more details on discontinued operations refer to Note 21 (Discontinued Operations and Non-

current assets held for sale).

The notes on pages 23 to 78 are an integral part of these financial statements.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 23

NOTES TO THE FINANCIAL STATEMENTS

If not mentioned otherwise, referral to the Group’s policies and procedures should be also considered as referral to the respective

Bank’s policies and procedures. Figures in parenthesis represent amounts as of 31 December 2021 or for the twelve months period

ended 31 December 2021.

NOTE 1. AUTHORISATION OF THE FINANCIAL STATEMENTS

These financial statements have been authorised for issuance by the Management Board and comprise the financial information of

AS Citadele banka (hereinafter – the Bank or Citadele) and its subsidiaries (together – the Group).

NOTE 2. GENERAL INFORMATION

Citadele is a Latvian-based full-service financial group offering a wide range of banking products to retail, SME and corporate customer

base as well as wealth management, asset management, life insurance, pension, leasing and factoring products. Alongside traditional

banking services, Citadele offers a range of services based on next-generation financial technology, including a modern mobile

application, contactless and instant payments, modern client onboarding practices and technologically-enabled best-in-class customer

service.

As of period end the Bank operates branches in Latvia, Lithuania and Estonia. AS Citadele banka is the parent company of the Group.

The Group’s main market is the Baltics (Latvia, Lithuania and Estonia). Citadele was registered as a joint stock company on 30 June

2010. Citadele commenced its operations on 1 August 2010. As of 31 December 2022, the Group had 1,355 (2021: 1,335) and the

Bank had 1,113 (2021: 1,100) full time equivalent active employees. From total Group’s full time equivalent active employees 26

(2021: 25) were with discontinued operations.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of preparation

These financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the

European Union and relevant Financial and Capital Markets Commission’s (FCMC) regulations on a going concern basis. The financial

statements are prepared under the historical cost convention, except for assets measured at fair value through other comprehensive

income, financial assets and financial liabilities measured at fair value through profit or loss and all derivative contracts, which have

been measured at fair value.

The Management considers going concern basis of accounting appropriate in preparing these financial statements; there are no

material uncertainties in applying going concern basis of accounting. The Group’s financial and capital position, business activities,

its risk management objectives and policies and the major risks to which the Group is exposed to are disclosed in the Risk

Management section of these financial statements. Liquidity risk management is particularly important in respect to the going concern

convention, as a failure to have a sufficient funding to meet payment obligations due may result in an extraordinary borrowing at

excessive cost, regulatory requirement breach, delays in day-to-day settlements activities or cause the Group to no longer be a going

concern; for more details refer to Liquidity risk management section. Regulatory compliance, especially capital adequacy

requirements, is also significant to the going concern of the Group. The Group conducts and plans business in accordance with the

available capital and in line with other regulatory requirements. For capital adequacy ratios as at period end refer to the Capital

management section. The Group has implemented a comprehensive liquidity risk management and capital planning framework and

policies and procedures to manage other risks .

The preparation of financial statements in conformity with IFRS as adopted by the EU requires use of estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on

the Management’s best knowledge of current events and actions, actual results ultimately may differ from the estimated. For more

details refer to paragraph ff).

b) New standards and amendments

New standards, interpretations and amendments which were not applicable to the previous annual financial statements have been

issued. Some of the standards become effective in 2022, others become effective for later reporting periods. In this section those

relevant for the Group are summarised. Where the implementation impact was or is expected to be reasonably material it is disclosed.

New requirements effective for 2022 which did not have a significant effect to the Group

Amendment to IFRS 16 – COVID-19-Related Rent Concessions beyond 30 June 2021

Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract

Annual Improvements to IFRS Standards 2018-2020

Amendments to IAS 16 – Property, Plant and Equipment: Proceeds before Intended Use

Amendments to IFRS 3 – Reference to the Conceptual Framework

Upcoming requirements not in force from 1 January 2022

Certain new standards, amendments to standards and interpretations have been endorsed by EU for the accounting periods beginning

after 1 January 2022 or are not yet effective in the EU. These standards have not been applied in preparing these financial statements.

The Group does not plan to adopt any of these standards early. The Group is in the process of evaluating the potential effect if any of

changes arise from these new standards and interpretations.

IFRS 17 - Insurance Contracts. Effective for annual reporting periods beginning on or after 1 January 2023 with earlier application

permitted as long as IFRS 9 and IFRS 15 are also applied. The upcoming standard combines current measurement of the future cash

flows with the recognition of profit over the period that services are provided under the contract. Groups of insurance contracts have

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 24

to be measured at a risk-adjusted present value of the future cash flows adjusted for unearned profits or losses. Profit from a group

of insurance contracts is recognised over the period the insurance cover is provided, and as the risk is released; loss from a group of

contracts is recognised immediately. The standard requires presenting insurance service results separately from insurance finance

income or expenses and requires making an accounting policy choice of whether to recognise all insurance finance income or

expenses in profit or loss or to recognise some of that income or expenses in other comprehensive income.

The Group had set up an internal IFRS 17 implementation working group. Within the scope of the project, the Group reworks models,

IT systems, processes and documentation which will be followed by final testing and validation. External expertise is attracted where

and when deemed necessary. As appropriate the Group leverages existing processes, systems, models and data, although in many

areas new models and revisions to the existing models are needed to be developed. The Group is in the process of finalisation of

quantifying the expected impact. For the Group, as a result of implementation of IFRS 17, large part of the existing insurance contracts

ceases to qualify as insurance contracts and are to be reclassified to Deposits and borrowings from customers and accounted for at

amortised cost, thus reversing recent discounting gains from increases in interest rates. On contrary, other contracts start to qualify

as insurance contracts requiring application of Variable fee approach (VFA) and General measurement model (GMM). Implementation

impact from permitted debt instrument reclassification from Fair value through other comprehensive income to amortised cost (AmC)

accounting is still to be quantified. The Banks expects no material impact from IFRS 17 implementation.

The expected IFRS 17 implementation impact on carrying amount by class of select insurance business related items as of 31 December 2022:

Group, EUR millions

31/12/2022

as reported

(IFRS 4)

Annuity

Investment

IFRS9 (AmC)

Full

retrospective

approach

Unit linked

agreement with

risk insurance

IFRS17 (VFA)

Fair value

approach

Fixed rate

agreement with

risk insurance

IFRS17 (GMM)

Fair value

approach

Other

items

31/12/2022

adjusted

(IFRS 17)

Deposits and borrowings from customers

25.2

47.4

(0.9)

(0.6)

71.2

Insurance reserves and other items

49.7

(42.2)

0.9

0.6

0.2

9.2

IFRS 17 implementation impact on equity,

including securities reclassification

(5.2)

0.1

(0.1)

0.2

(5.0)

Amendments to IAS 1 – Classification of liabilities as current or non-current and Non-current Liabilities with Covenants

Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policy

Amendments to IAS 8 – Definition of Accounting Estimate

Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback

Amendments to IAS 12 – Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

c) Functional and Presentation Currency

The functional currency of each of the Group’s consolidated entities is the currency of the primary economic environment in which the

entity operates. The functional currency of the Bank, its Baltic subsidiaries, and the Group’s presentation currency, is Euro (“EUR”).

The functional currency of majority of the Group’s foreign subsidiaries is also Euro. The accompanying financial statements are

presented in thousands of Euros.

d) Basis of consolidation

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns

from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financials of

subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which

control ceases. The investments in the subsidiaries are presented in the Bank’s financial statements at cost. More detailed information

on the Group’s subsidiaries is presented in Note 19 (Investments in Related Entities).

The financial statements of AS Citadele banka and its subsidiaries are consolidated in the Group’s financial statements on a line by

line basis by aggregating like items of assets, liabilities, income and expenses. For the purposes of consolidation, intragroup balances

and intragroup transactions, including interest income and expense as well as unrealised profits and loss resulting from intragroup

transactions, are eliminated in the Group’s financial statements.

e) Income and expense recognition

Income and revenue are only recognised, if the Group is likely to receive economic benefits associated with the transaction. Interest

income and expense items are recognised on an accrual basis using the effective interest rate. Commissions in respect of the

acquisition of financial assets or the issue of financial liabilities that are not at fair value through profit or loss are deferred and

recognised as an adjustment to the effective yield on the respective asset or liability. The Group presents the fee income from financial

guarantees as part of fee and commission income. For loan commitments which are not expected to result in draw-down, the

reservation fee is credited to the income statement on a straight-line basis over the commitment period. For a contract with a customer

containing a financial instrument, the part that relates to financial instrument is measured and separated first and then to the residual

part recognised appropriately as revenue from contracts with customers.

Revenue from contracts with customers, including account servicing fees, asset management fees, custody fees and sales

commissions are credited to the statement of income as the related services are performed and control over a service is transferred

to a customer. Revenue from customers is recognised as fee and commission income or other income. Revenue may be recognised

at a point in time or over the time. Over time revenue recognition is proportional to progress towards satisfying a performance obligation

by transferring control of promised services to a customer. Revenue which does not qualify for recognition over time is recognised at

a point in time when the service is rendered or product is sold. The Group has no material contract assets and contract liabilities from

contracts with customers.

The nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms,

and the related revenue recognition policies for the major categories of commission income:

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 25

Cards, payments and transactions – regular fees for accounts servicing, cards and product packages are charged to the customers

on a monthly basis according to the price list; revenue is recognised over time as the services are provided. Transaction-based fees

for payments, foreign to the customer’s when the transaction takes place and revenue is recognised at the point in time when the

currency transactions and similar are charged transaction takes place.

Asset management, custody and securities – fees are calculated based on a fixed percentage of the value of assets managed or held

in custody and are deducted from the customer’s account on a monthly basis. Upon commencement of the service an insignificant

non-refundable initial fee may be charged as a compensation for client’s screening, agreement and other services provided. Revenue

from management and custody services is recognised over time as the services are provided.

Fee and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. Penalty

income is recognised on cash-received basis as often there is significant uncertainty about collectability .

f) Foreign currency translation

Transactions denominated in foreign currencies are recorded in Euros at the rates of exchange effective at the date of the transaction.

Non-monetary items that are measured at fair value in a foreign currency, such as investments in equity instruments, are translated

using the exchange rates at the date when the fair value was determined and the impact from changes in foreign exchange rates are

treated as foreign exchange gain/loss in the statement of income, with exception of non-monetary financial assets at fair value through

other comprehensive income for which any foreign exchange gain or loss is recognised in other comprehensive income. Monetary

assets and liabilities denominated in foreign currencies are translated into functional currency at the official rate of exchange prevailing

at the reporting date. Any gain or loss resulting from a change in rates of exchange subsequent to the date of the transaction is

included in the statement of income as profit or loss from revaluation of foreign currency positions.

The results and financial position of all the Group’s entities that have a functional currency different from the presentation currency

are translated into the presentation currency as follows:

• assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that

statement of financial position;

• income and expenses for each statement of income are translated at average exchange rates (unless this average is not a

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and

expenses are translated at the dates of the transactions);

• all resulting exchange differences are recognised as other comprehensive income.

g) Staff costs and related contributions

The Group recognises employee financial benefits when an employee has rendered services in exchange for these financial benefits.

The Group's personnel expenses relate mostly to short term benefits and related tax expense. The Group pays social security

contributions to state pension insurance and to state-funded pension scheme in accordance with the relevant regulations. In most

countries where the Group operates, a part of the social insurance contributions is used to fund the state defined contribution pension

system. The state-funded pension scheme is a defined contribution plan under which the Group pay fixed contributions determined

by law and will have no legal or constructive obligation to pay further contributions if the state pension insurance system or the state-

funded pension scheme is not able to settle their liabilities to employees. The social security contributions are accrued in the period

in which the associated services are rendered by the employees of the Group.

Citadele has multi-year long-term incentive plans for its employees. Under the approved long-term incentive plans share options are

granted. Settlement is expected in shares of Citadele. Each option grants eligibility to one ordinary share of Citadele and has an

exercise price of null euros. Vesting dates are predetermined. For each participant individual performance conditions aligned with

business plan and strategic objectives of Citadele apply. The Remuneration and Nomination Committee of the Supervisory Board is

responsible for aligning, setting and amending individual performance conditions. Granted options may be forfeited to the extent any

of the performance conditions are not satisfied at sole discretion of the committee.

Expense for share-based remuneration is measured at fair value at the grant date. Share-based remuneration may be in a form of

Citadele shares or conditional share options. The grant date is the date at which the entity and the participating employee agrees to

a share-based payment arrangement, signifying a shared understanding of the terms and conditions of the arrangement. The fair

value is the estimated share price reduced by the present value of dividends that participants will not receive and value of other

restricting terms of the compensation agreed. Expense for share-based remuneration is re-measured only if the compensation

arrangement is modified so that the fair value after modification has increased compared to the fair value before modification. Such

increase is recognised as compensation expense at the re-measurement date.

The expense is recognised on a straight-line basis over the period of the remuneration program as intention is to receive services

from employees over the whole period. For share options over vesting period a corresponding increase in equity is recognised as

other reserves. Estimates of actual or expected forfeitures are re-estimated at each reporting date and if necessary, previously

recognised other reserves are reversed directly to the retained earnings. After deferral period, when vesting conditions are met and

conditional share option exercised, previously recognised other reserves are transferred to issued share capital and share premium

accounts.

h) Customer loyalty programmes

To reward and promote customers to actively use products of the Group, the Group has implemented several customer loyalty

programs. Loyalty point and similar incentives represent discounts that a customer can choose to use in the future to acquire additional

goods or services of retail nature. A portion of the transaction price is allocated to the material performance obligation not yet fulfilled.

All benefits awarded to customers are fully accrued at the moment the benefits are awarded. The amount allocated is based on the

stand-alone price of the loyalty incentive. Revenue and related costs in the income statement are recognised when the Group has

satisfied its performance obligations relating to the loyalty incentive or when the incentive expire or are cancelled.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 26

i) Corporate income tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the

reporting date, and any adjustment to tax payable in respect of previous years. Current corporate income tax assets and liabilities are

measured at the amount expected to be obtained from or paid to tax authorities. Certain Group companies pay income tax on profit

distribution (e.g. dividends). Correspondingly, for these Group companies, income tax on profit distribution is recognised as expenses

only at the moment dividends are declared.

Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising

between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the

initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability

in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable

profit. Deferred tax liabilities are not recorded for temporary differences on initial recognition of goodwill and subsequently for goodwill

which is not deductible for tax purposes. Deferred tax balances are measured at tax rates enacted or substantively enacted at the

end of the reporting period which are expected to apply to the period when the temporary differences are reversed or the tax loss

carry forwards are utilised. The deferred tax balance is measured at a tax rate which is applicable for undistributed profits until decision

of profits distribution is made. Therefore, for jurisdictions where income tax is payable on profit distribution (e.g. dividends) any deferred

tax liabilities or benefits are recognised at a tax rate applicable to undistributed profits. When applicable at the Group level the deferred

tax is recognised at the expected future taxable dividend rate. Deferred tax assets and liabilities are netted only within the individual

companies of the Group and only if certain criteria are met. Deferred tax assets for deductible temporary differences and tax loss carry

forwards are recorded only to the extent that it is probable that future taxable profit will be available against which the deductions can

be utilised.

The carrying amount of deferred corporate income tax asset, if any, is reviewed at each reporting date and reduced to the extent that

it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

The future taxable profits and the amount of tax benefits that are probable in the future are based on a medium-term financial forecast

prepared by management and extrapolated results thereafter. The financial forecast is based on management expectations that are

believed to be reasonable under the current circumstances.

j) Financial instruments classification and measurement

The Group recognises a financial asset on its balance sheet when, and only when, the Group becomes a party to the contract.

Financial assets are classified as either subsequently measured at amortised cost, fair value through other comprehensive income or

fair value through profit or loss. The basis for classification is both business model for managing the financial assets and the contractual

cash flow characteristics of the financial asset. At acquisition the applicable classification is evaluated based on the guidelines

established by the Group. For financial asset classification to a particular category, the Group at inception determines that the asset

meets the relevant business model and contractual cash flow criteria. The business model is observable through the activities of the

Group. It refers to how the Group typically manages its financial assets in order to generate cash flows; thus, the assessment is not

performed on the basis of scenarios that the Group does not reasonably expect to occur. In a stress case, if cash flows are realised

in a way that is different from the Group’s expectations embedded in the business model, it does not give rise to a prior period error

nor does it change the classification of the remaining financial assets held in that business model. However, for future acquisitions

past cash flows are considered and may give rise to change in the business model.

At initial recognition, the financial assets or financial liabilities are measured at fair value, plus, in the case of investments not at fair

value through profit or loss, directly attributable incremental transaction costs. All “regular way” purchases and sales of investments

are recognised using settlement date accounting. The settlement date is the date when an asset is delivered to or by the Group.

Settlement date accounting refers to the recognition of an asset on the day it is transferred to the Group and to the de-recognition of

an asset, on the day that it is transferred by the Group.

Financial assets and liabilities measured at amortised cost

For a financial asset to be measured at amortised cost it should both be held within a business model whose objective is to hold

financial assets in order to collect contractual cash flows and the contractual terms of the financial asset should give rise on specified

dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets measured at amortised cost are carried at amortised cost using the effective interest rate method, less any allowance

for impairment. The impairment allowance for financial assets that are not-credit impaired (stage 1 and stage 2 classified) is measured

as the present value of all cash shortfalls which is the difference between the cash flows due to the Group in accordance with contract

and the cash flows that the Group expects to receive discounted at the effective interest rate of a financial asset. The impairment

allowance for financial assets that are credit impaired at the reporting date (stage 3 classified) is measured as the difference between

the gross carrying amount and the present value of estimated future cash flows discounted at the effective interest rate of the financial

asset. For the purchased or originated credit-impaired financial assets the credit-adjusted effective interest rate is applied from initial

recognition.

A gain or loss on a financial asset that is measured at amortised cost is recognised in the profit or loss when the financial asset is

derecognised, reclassified, through the amortisation process or to recognise impairment gains or losses. Financial assets at amortised

cost are recognised on drawdown. From the date of signing a contractual agreement till drawdown, the contractually committed

amounts are accounted for as off-balance sheet commitments.

Modification or renegotiation of contractual cash flows of a financial asset that does not result in de-recognition of that financial asset,

requires the Group to recalculate the gross carrying amount of the financial asset and recognise a modification gain or loss in profit

or loss. The gross carrying amount is recalculated as the present value of the renegotiated or modified contractual cash flows through

the expected life of the asset that are discounted at the financial asset’s original effective interest rate or credit-adjusted effective

interest rate for purchased or originated credit-impaired financial assets. When estimating the expected cash flows, all contractual

terms and payments are considered, except for the expected credit losses, unless the financial asset is a purchased or originated

credit-impaired financial asset. Costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised

over the remaining term of the modified financial asset.

When the financial asset or part of it cannot be recovered, it or the respective part is written-off and charged against impairment for

credit losses. The Group makes the decision regarding any write-off of financial assets based on existence and valuation of collateral

available for a foreclosure, and the likelihood and the amount of any other expected future cash flows. Recoveries of previously

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AS Citadele banka Annual report for the year ended 31 December 2022 27

written-off assets or parts of assets are credited to the statement of income.

The Group classifies all financial liabilities as subsequently measured at amortised cost using the effective interest rate method, except

for derivatives and certain deposit components of the insurance plan liabilities which are measured at fair value through profit or loss.

A gain or loss on a financial liability that is measured at amortised cost is recognised in profit or loss when the financial liability is

derecognised and through the amortisation process.

Financial assets measured at fair value through other comprehensive income

For a financial asset to be measured at fair value through other comprehensive income it should both be held within a business model

whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the

financial asset should give rise on specified dates to cash flows that are solely payments of principal and interest on the principal

amount outstanding. The Group’s financial assets measured at fair value through other comprehensive income are intended to be

held for an undefined period of time and may be sold in response to needs for liquidity or changes in interest rates, exchange rates or

equity prices.

Financial assets measured at fair value through other comprehensive income are subsequently re-measured at fair value based on

available market prices. A revaluation gain or loss on a financial asset measured at fair value through other comprehensive income is

recognised in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the

financial asset is derecognised or reclassified. For debt securities the difference between the initial carrying amount and amortised

cost determined by the effective interest rate method is treated as interest income and is recognised in profit or loss; on derecognising

the cumulative fair value revaluation gain or loss previously recognised in other comprehensive income is reclassified from equity to

profit or loss.

For non-equity financial instruments measured at fair value through other comprehensive income, the loss allowance is recognised in

other comprehensive income and does not reduce the carrying amount in the balance sheet. Impairment gains or losses are

recognised in profit or loss.

For equity instruments that are neither held for trading nor acquired in a business combination, the Group at initial recognition, has to

make an irrevocable election to present subsequent changes in the fair value of each instrument in other comprehensive income or

profit or loss. This election is made on an instrument-by-instrument basis. Amounts presented in other comprehensive income

subsequently are not transferred to profit or loss, but cumulative gain or loss on disposal is transferred directly to retained earnings.

Dividends on equity instruments classified at fair value through other comprehensive income are recognised in the statement of

income. Such equity instruments are not tested for impairment, but carried at fair value.

Financial assets and liabilities measured at fair value through profit or loss

A financial asset is measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other

comprehensive income. For equity instruments that would otherwise be measured at fair value through profit or loss an irrevocable

election at initial recognition on instrument-by-instrument basis is made to present subsequent changes in fair value in other

comprehensive income. Also a financial asset or liability, at initial recognition, may be irrevocably designated as measured at fair

value through profit or loss if doing so eliminates or significantly reduces “accounting mismatch” that would otherwise arise from

measuring assets or liabilities or recognising the gains and losses on them on different bases, or when a group of financial liabilities

or a group of financial assets and financial liabilities are managed and its performance evaluated on a fair value basis, in accordance

with a documented risk management or investment strategy, and information about the group is provided internally on that basis to

the management.

Excluding interest on interest rate swaps, interest on financial assets measured at fair value through profit or loss is included in net

interest income. Revaluation and trading gains or losses arising from changes in fair value of financial assets or financial liabilities

that are measured at fair value through profit or loss, as well as interest on interest rate swaps, are recognised directly in the statement

of income as net financial income. Such financial assets and liabilities are subsequently re-measured at fair value based on available

market prices or quotes of brokers.

Included in this category are (a) unit-linked investment contract liabilities and respective investments and (b) certain life insurance

contract liabilities, which are managed and evaluated on a fair value basis, in accordance with a documented risk management or

investment strategy. According to unit-linked investment contract terms, the credit risk associated with the investments made by the

insurance underwriter is fully attributable to the counterparty entering into the insurance agreement and not the underwriter. As such,

by designating both assets acquired and liabilities undertaken at fair value through profit or loss, a potential accounting mismatch is

avoided.

Financial assets and liabilities which are held for trading are measured at fair value through profit or loss. Financial assets and liabilities

are held for trading if they are either acquired in a business model which is characterised by generation of a profit from short-term

fluctuations in price or dealer’s margin, or a pattern of short-term profit taking exists.

Derivative Financial Instruments

In the ordinary course of business, the Group engages as a party to contracts for forward foreign exchange rate, currency and

sometimes interest rate swap instruments and other derivative financial instruments. All derivatives are classified as measured at fair

value through profit or loss.

Subsequent to initial recognition, outstanding forward foreign exchange rate contracts, currency swaps and other derivative financial

instruments are carried in the balance sheet at their fair value. The fair value of these instruments is recognised on the balance sheet

as derivative assets and liabilities.

Gains or losses from changes in the fair value of outstanding forward foreign exchange rate contracts, currency and interest rate

swaps and other derivative financial instruments are recognised in the statement of income as they arise.

k) Sale and repurchase agreements

These agreements are accounted for as financing transactions. Under sale and repurchase agreements, where the Group is the

transferor, assets transferred remain on the Group’s balance sheet and are subject to the Group’s usual accounting policies, with the

purchase price received included as a liability owed to the transferee. Assets in the balance sheet are shown separately from other

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assets when the transferee has the right by contract or custom to sell or re-pledge the collateral.

Where the Group is the transferee, the assets are not included in the Group’s balance sheet, but the purchase price paid by it to the

transferor is included as an asset. Interest income or expense arising from outstanding sale and repurchase agreements is recognised

in the statement of income over the term of the agreement.

l) De-recognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the contractual rights to receive cash flows from the financial asset have expired; or

• the Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset,

but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; and

• the Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained

substantially all the risks and rewards of the asset, but has transferred control of the asset.

Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing

transactions is not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined

repurchase price, and the criteria for de-recognition are therefore not met.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an

existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and

the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

Debt securities issued and other borrowed funds

The Group recognises financial liabilities on its balance on drawdown.

After an initial measurement, being a fair value minus directly attributable transaction costs, in the case of a financial liability not at fair

value through profit or loss, debt issued, subordinated liabilities and borrowings are measured at amortised cost and any difference

between net proceeds and value at redemption is recognised in the statement of income over the period of borrowing using the

effective interest rate.

m) Fair values of financial assets and liabilities

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group

has access at that date. The fair value of a liability reflects its non-performance risk. Where available and reasonably reliable, fair

values are determined by reference to observable market prices. Where representative market prices are not available or are

unreliable, fair values are determined by using valuation techniques which refer to observable market data. These include prices

obtained from independent market surveys, comparisons with similar financial instruments, discounted cash flow analyses and other

valuation techniques commonly accepted and used by market participants.

Future events may cause the assumptions used in arriving at the estimates to change. The effect of any changes in estimates will be

recorded in the financial statements, when determinable. Furthermore, changes and movements in market conditions may affect

accuracy of the fair value calculations so that the actual outcome of a transaction is different from the one reported in the financial

statements. Also, when changed, management estimates used in preparing these financial statements could impact the reported

results of the Group.

n) Leases

Finance leases – Group as lessor

Finance leases, which transfer substantially all the risks and rewards incidental to ownership of the assets, are recognised as assets

at amounts equal at the inception of the lease to the net investment in the lease. The finance income is allocated over time period in-

line with the lease term to produce a constant return on the net investments outstanding in respect of the finance leases. Finance

lease receivables are presented as loans to public.

Operating leases – Group as lessor

The Group presents assets subject to operating leases in the balance sheets according to the nature of the asset. Lease income from

operating leases is recognised in statement of income over the lease term as other income. The aggregate cost of incentives provided

to lessees is recognised as a reduction of rental income over the lease term. Initial direct costs incurred specifically to earn revenues

from an operating lease are added to the carrying amount of the leased asset.

The depreciation policy for depreciable leased assets is consistent with the lessor’s normal depreciation policy for similar assets, and

depreciation is calculated in accordance with accounting policies, used for the Group’s tangible assets.

Group as lessee

A lease is a contract, or a part of a contract, that conveys the right to use asset (the lease asset) for a period of time in exchange for

consideration. For qualifying lease assets, upon lease commencement, a lessee recognises a right-of-use asset and a lease liability.

The right-of-use asset is initially measured at the amount of the lease liability plus any initial direct costs and expected dismantling

costs, less payments before commencement and incentives received. Subsequently the right-of-use asset is measured using a cost

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AS Citadele banka Annual report for the year ended 31 December 2022 29

model. A right-of-use asset is measured at cost less any accumulated depreciation and impairment. The lease liability is initially

measured as a discounted value of payments agreed over the lease term. An incremental borrowing rate which discounts future

payments to estimated present value is applied. The Group presents right-of-use assets in the same line items in which it presents

assets of the same nature that it owns. Lease liabilities are presented within other liabilities. The Group uses the practical expedient

of low-value items where any item generating cash outflows of less than EUR 5 thousand during the lease term is expensed as

incurred with no right-of-use asset or lease liability recognition.

When estimating lease term, the Group’s intentions as well as contractual early termination and extension options of lessee and lessor

are considered. When a previously recognised lease is modified and the scope of the lease increases and the increase in

compensation is commensurate, a new separate lease is recognised. If the increase in compensation is not commensurate or the

scope of the lease decreases the current right-of-use asset and corresponding lease liability is re-measured. In case of a decrease in

scope of the lease a gain or loss (if any) is recognised in the income statement.

For lease contracts with eligible extension or early termination clauses a lease term equal to the planning horizon of three years is

often applied unless the lease term is shorter already. In case of branches this is based on a plan to move towards a more digital

model less dependent on the physical presence. For lease of the headquarters building and certain other lease items a three years

lease term assumption is applied linking this to the business planning horizon of the Group. Incremental borrowing rate, derivate from

the Bank’s deposit rate, but adjusted for additional spread for absence of deposit guarantee for leases, is applied.

When a transfer of an asset by the seller-lessee satisfies the requirements of IFRS 15 to be accounted for as a sale of the asset, the

seller-lessee measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset

that relates to the right of use retained by the seller-lessee. Accordingly, on the day of sale the seller-lessee recognises only the

amount of any gain or loss that relates to the rights transferred to the buyer-lessor. The Group accounts for the deferred sales gain

as a reduction of the right of use asset that would be recognised otherwise, in effect presenting the leaseback right of use asset at the

before sales carrying value, though applying the most recent expectations when determining lease period. The deferred sales gain is

amortised to income statement over the lease period, but not as a gain, but as a reduction in the right of use depreciation charges.

o) Renegotiated loans and debt forbearances

For economic or legal reasons, the Group might enter into a forbearance agreement with borrowers in financial difficulties in order to

ease the contractual obligation for a limited period of time. By taking into account exposure specifics, an individual approach is

practised. Generally, debt forbearance will take a form of payment deferral to a later time with the amount payable and interest due

re-compensated at a later date. Renegotiated loans are considered non-overdue as long as contractual payments are made on

contractually due dates. When the terms of a financial asset are renegotiated or modified a de-recognition assessment is made. When

modifications result in de-recognition of the existing financial asset, then the estimated fair value of the asset is treated as cash inflow

from the existing financial asset and a new contract is recognised at fair value plus any eligible transaction costs. When modification

results in de-recognition, a new loan is recognised and allocated to Stage 1, if not credit-impaired at that time. When modification or

renegotiation of contractual cash flows of a financial asset does not result in de-recognition of financial asset, the Group recalculate

the gross carrying amount of the financial asset and recognise a modification gain or loss in profit or loss. For discounting expected

future cash flows the financial asset’s original effective interest rate or credit-adjusted effective interest rate for purchased or originated

credit-impaired financial assets is applied.

p) Impairment of loans to public and provisions for loan commitments, guarantees and letters of credit

The economic conditions of the markets the Group operates in may have an impact on the borrowers’ ability to repay their debts. The

Management of the Group considers both specific exposures and portfolio-level risks in determining the balance of impairment

allowance for expected credit losses. The expected credit loss assessment is forward-looking and is based on unbiased and

probability-weighted information about past events, current conditions and forecasts of future economic conditions. Impairment

allowance for expected credit losses is recognised even if no credit loss event has happened. A loan or portfolio of loans to public is

impaired and impairment losses are incurred if, and only if, there is objective evidence that the estimated present value of future cash

flows is less than the current carrying value of the loan or portfolio of loans to public, and it can be reliably estimated. Lease receivables

are included in loans to public for expected credit loss assessment purposes; the methodology is consistently applied.

Loss allowances for expected credit losses on loan commitments and financial guarantee contracts are recognised as provisions. The

provisioning principles for expected losses arising from off-balance sheet financial commitments and contingent liabilities are

consistent with the principles and methods applied for on-balance sheet exposures. Additional considerations are applied to

adjustments for expected conversion and future use patterns of the committed limits and the Group’s performance in timely

identification and termination of limits for deteriorating exposures.

Expected credit losses are recognised based on the stage in which the exposure is allocated at the reporting date. 12-month expected

credit losses are recognised for Stage 1 exposures, where credit risk has not increased since initial recognition. Lifetime expected

credit losses are recognised for Stage 2 exposures whose credit risk has increased significantly since initial recognition and for Stage

3 exposures which are credit impaired. Days past due is one of the main quantitative indicators used to assess the ‘significant increase

in credit risk’ (proxy for transferring exposures from Stage 1 to Stage 2) augmented by other additional risk factors (e.g. internal credit

rating grade, forbearance, breach of financial covenants). Significant increase in credit risk in comparison to the initial credit risk is the

criteria for transfer to Stage 2. Days past due backstops equal or stricter than regulatory minimum are applied. ‘Significant increase

in credit risk’ for consumer and card loans is triggered when 15 days past due are exceed, for leasing exposures ‘significant increase

in credit risk’ is triggered when 26 days past due are exceed, while for other portfolios a threshold of 30 days past due is used. Days

past due more than 89 is a trigger for ‘default’. Internal credit rating grade based absolute threshold of 20% minimum 1-year PD and

a relative threshold of 200% increase in lifetime PD since origination are other ‘significant increase in credit risk’ threshold triggers.

For lending products where advanced credit scoring models have been validated, a client individual rating, based on multitude of

inputs characterising credit standing of the client are monitored. Client individual ratings cover loans to financial and non-financial

corporations, finance leases, and partially loan products to households. For these loan products, where individual credit scoring

models have not been validated yet, a simpler less client specific model is applied. The simpler model to arrive to the credit rating

corelates days past due of the particular exposure to point in time adjusted past credit performance derived statistics of the group

segmented by product, geography and other relevant factors. The Group is in the process of transitioning all landing products to

advanced credit scoring models. The ‘default’ is defined in line with the prudential definition of the default: exposure delayed for certain

amount of days or more, exposure is individually impaired, significant forbearance and other unlikeliness to pay indicators. The ‘default’

is the criteria for a transfer to Stage 3. Exposure is no longer considered to have significantly increased credit risk (transfer from Stage

2 to Stage 1) or default (transfer from Stage 3 to Stage 2) when specific time period has passed (in some instances up to 2 years )

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from the moment when all increased risk of default factors are no longer observed. Significant forbearance measures are within risk

factors for which an extended monitoring period applies. The length of the monitoring period is proportionate to the significance of the

risk factor observed and forbearance measures undertaken. The models are calibrated for transfer of exposures to lower stage to

happen only when a significant reduction in the risk of non-performance has been observed beforehand. Merton-Vasicek framework

is used in macroeconomic model to estimates changes in PDs.

The Group first assesses whether objective evidence of impairment exists individually for loans to public that are individually

significant, and individually or collectively for loans that are not individually significant. If the Group determines that no objective

evidence of impairment exists for an individually assessed loan, whether significant or not, it includes that loan in a group of loans

with similar credit risk characteristics and collectively assesses them for impairment. As soon as information is available that

specifically identifies losses on individually impaired loans included in a group of loans with similar credit risk characteristics, those

loans are removed from the group. Assets that are individually assessed for impairment and for which an impairment loss is or

continues to be recognised are not included in a collective assessment of impairment.

For collective measurement of expected credit losses, the Group has selected to use EAD x PD x LGD approach, where EAD stands

for exposure at default, PD – probability of default, and LGD – loss given default. To estimate probability weighted cash flows, the

Group uses single scenario expected cash flow method with overlays for alternative scenarios for macroeconomic factors. The major

macroeconomic factors considered are unemployment rate, average monthly wage, real gross domestic product and real estate

prices. PDs and LGDs are derived from historic performance of the loans to public. LGDs are adjusted for forward looking information.

‘Point in time’ probabilities (probability of default in the current economic conditions, as opposed to economic cycle-neutral ‘through

the cycle’ probabilities of default as often used for regulatory purposes) are used for PDs. Correspondingly, estimated PDs are

expected to change through the economic cycle. For measurement of expected credit loses financial instruments are grouped on the

basis of shared credit risk characteristics. The grouping considers distinct characteristics in industry, product type, collateral type and

geographical location of the borrower.

A loan is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial

asset have occurred. Evidence that a loan is credit-impaired includes observable data about the following events:

• significant financial difficulty of the borrower;

• a breach of contract, such as a default or delinquency in interest or principal payments, persistent and major covenant

noncompliance;

• granting to the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, a material concession

that the lender would not otherwise consider;

• the borrower entering bankruptcy or other financial reorganisation becomes highly probable;

• the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses;

• a combination of several other events that cause a loan to become credit-impaired.

For a loan that is credit-impaired at the reporting date, but that is not a purchased or originated credit-impaired financial asset, the

expected credit losses are measured as the difference between the loan’s gross carrying amount and the present value of estimated

future cash flows discounted at the loan’s original effective interest rate. Any adjustment is recognised as an impairment gain or loss.

The assessment of whether lifetime expected credit losses should be recognised is based on significant increases in the likelihood

(Stage 2) or risk of a default (Stage 3) occurring since initial recognition instead of on evidence of a financial asset being credit-

impaired at the reporting date or an actual default occurring. In most cases, there will be a significant increase in credit risk before a

financial asset becomes credit-impaired or an actual default occurs (Stage 3), thus default (Stage 3) and credit-impaired loan

classification will be closely aligned and will indicate non-performance of the borrower or significance of forbearance measures

undertaken, but classification will not necessarily equal in all cases.

For loans to public, the amount of impairment loss is measured as the difference between the loan’s carrying amount and the present

value of estimated future cash flows discounted at the loan’s original effective interest rate. If a loan has a variable interest rate, the

discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation

of the present value of the estimated future cash flows of a collateralised loan reflects the cash flows that may result from foreclosure

less costs for obtaining and selling the collateral, whether or not foreclosure is probable. The amount of the loss is recognised in the

statement of income.

If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed. Any

subsequent reversal of the impairment loss is recognised in the statement of income, to the extent that the carrying value of the loan

does not exceed what its amortised cost would have been absent the impairment at the reversal date.

For purchased or originated credit-impaired financial assets, expected credit losses are discounted using the credit-adjusted effective

interest rate determined at initial recognition. For purchased or originated credit-impaired financial assets only the cumulative changes

in lifetime expected credit losses since initial recognition are recognised as a loss allowance. Favourable changes in lifetime expected

credit losses are recognised as an impairment gain, even if the lifetime expected credit losses are less than the amount of expected

credit losses that were included in the estimated cash flows on initial recognition.

Fully impaired loans to public, recovery of which may become economically unviable, may be written-off and charged against

impairment allowance. They are not written-off until the necessary legal procedures have been completed and the amount of the loss

is determined. When a loan or receivable is written-off, the claim against the borrower normally is not forgiven. Subsequent recoveries

of amounts previously written-off are reported in the statement of income as recovered written-off assets within net credit losses on

financial instruments. For certain products of the retail loan book the write-off decision is automated trigger based. For corporate loan

book an individual analysis is the basis for write-off decision of unrecoverable credit impaired exposures.

q) Financial guarantees received

Financial guarantees, which may be considered an integral part of the relevant credit exposures, are treated as credit enhancements

in expected credit loss calculation and guarantee fees are included in the effective interest rate calculation of the loans. The estimated

expected cash shortfall reflects cash flows expected from collateral and other credit enhancements and are part of the contractual

terms and are not recognised separately.

For financial guarantees received, which may not be considered an integral part of the relevant credit exposures, the fees payable for

the guarantee are not included in the effective interest rate calculation of the loans and are not presented as a part of the interest

income. Instead the cost of the guarantee is presented as fee and commission expense. Any reimbursement rights under the financial

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AS Citadele banka Annual report for the year ended 31 December 2022 31

guarantee contract is recognised as a separate (from loan book) reimbursement right assets. The reimbursement right asset is not

netted in the loan book and does not affect staging, despite having credit loss mitigating effect. The reimbursement gain income is

presented within the net credit losses in the income statement. The cost of the guarantee, if any paid in advance, is recognised as a

pre-payment asset and is amortised over the shorter of the lifetime guarantee and the expected life of the guaranteed loans.

If the financial guarantee contract includes government support part, where for example the guarantee fees payable are decreased

on condition that specific lending targets are met and the government support is not passed through to the ultimate borrowers, the

benefit is recognised as other income.

r) Impairment of debt securities and loans to credit institutions and central banks

Similarly, as for loans to public, the Group estimates expected credit losses to reflect changes in credit risk since initial recognition of

debt securities, loans to credit institutions and central banks exposures and commitments to extend credit. Impairment provisioning

requirements apply to financial assets at amortised cost, but do not apply to financial assets measured at fair value through profit or

loss. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised in other

comprehensive income and does not reduce the carrying amount in the balance sheet.

Impairment allowances are recognised based on forward looking information, even if no credit loss event has happened. The

assessment considers broad range of information, but as most of these types of exposures are rated, it relies heavily on external

credit ratings and rating agencies’ reported default rates derived by calculating multi-period rating transition matrices. If unavailable

for evaluation purposes, external credit ratings may be substituted by internally calculated credit quality levels. Credit risk triggers

(event of insolvency, any delay of payments, restructuring of debt) and individual credit risk analysis of the issuer are also considered.

The Group deems investment grade rated exposures as low credit risk, thus these are assumed no to have experienced a significant

increase in credit risk. For non-investment grade exposures decrease in external credit rating by more than 3 notches since acquisition

is deemed significant increase in credit risk. Expected credit losses are recognised based on the stage in which the exposure is

allocated at the reporting date. 12-month expected credit losses are recognised for Stage 1 exposures, where credit risk since initial

recognition has not increased significantly. Lifetime expected credit losses are recognised for Stage 2 exposures whose credit risk

has increased significantly since initial recognition and Stage 3 exposures which are credit impaired. Stage 3 exposures, if any were

identified, would additionally be subjected to comprehensive evaluation, including comparison to market valuations for similar

exposures, analysis of market depth of the respective security, past trading performance and all other available information.

s) Tangible assets

Property and equipment initially is measured at acquisition cost or creation cost. After initial measurement property and equipment is

carried at cost less any accumulated depreciation and any accumulated impairment losses. Property and equipment is periodically

reviewed for impairment according to principles described in the paragraph x) Impairment of non-financial assets. If the recoverable

value of an asset is lower than its carrying amount, the asset is written down to its recoverable amount.

Depreciation is calculated using straight-line method based on the estimated useful life of the asset. The following depreciation rates

have been applied:

Category

Annual depreciation rate

Buildings

1% - 10%

Transport vehicles

14% - 20%

Other

14% - 33%

Leasehold improvements are capitalised and depreciated over the remaining lease contract period on a straight-line basis. Land and

assets under construction are not depreciated.

Certain reconstruction and renovation costs of buildings, which improve their quality and performance, are capitalised and amortised

over the estimated useful life on a straight-line basis. Maintenance and repair costs are charged to the statement of income as incurred.

t) Intangible assets

Intangible assets comprise software, both purchased and internally generated. Separately acquired intangible assets are measured

at cost. The cost of separately acquired intangible assets also comprises directly attributable costs of preparing the asset for its

intended use. These include payroll and professional fees arising directly from bringing the asset to its working condition and costs of

testing whether the asset is functioning properly. The cost of separately acquired intangible assets doesn’t include future payments

of variable fees which are dependent on achievement of key performance indicators. Variable fees are capitalised into the cost of

intangible asset when relevant key performance indicators are achieved and fees become payable and amortised over the estimated

remaining useful life on a straight-line basis.

The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition.

Subsequent to the initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated

impairment loss. Annual amortisation rates applied on a straight-line basis to software and other intangible assets range from 10% to

33%. All intangible assets, except for goodwill, are with definite lives.

u) Inventories

From time to time the Group repossesses from its customers certain assets serving as collateral, when the customer cannot otherwise

meet his payment obligations and other loan work-out measures have been unsuccessful. Such repossessed assets which are

expected to be sold in the ordinary course of business and are not held for capital appreciation or rental income are classified as

inventories. Inventories mainly encompass real estate purchased and held for sale in near future by the Group’s real estate workout

companies.

Group’s inventories are accounted at individual cost. The costs of inventories comprise all costs of purchase, costs of conversion and

other costs incurred in bringing the inventories to their present condition. Inventories are held at the lower of purchase cost or net

realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of

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AS Citadele banka Annual report for the year ended 31 December 2022 32

completion and the estimated costs necessary to make the sale. The amount of write-down of inventories to net realisable value is

recognised as expense in the period the write-down occurs. When inventories are sold, the carrying amount of those inventories is

recognised as an expense in the period in which the related revenue is recognised.

v) Non-current assets held for sale

The Group classifies non-current assets as held for sale if their carrying amount is to be recovered through a sale transaction rather

than continuing use and the management has committed to an active plan that is expected to result in a complete sale within one year

from the date of classification.

Non-current assets classified as held for sale also include assets of a class that an entity would normally regard as non-current that

are acquired exclusively with a view to resell in the near term but are not expected to be sold in the ordinary course of business.

Assets classified as held for sale are stated at the lower of their carrying amount and fair value less costs to sell of the non-current

asset. At least at each reporting date, the Group assesses, whether the value of the non-current assets classified as held for sale is

impaired. The impairment loss reduces carrying amount of the asset and is included in the statement of income’s line ‘Other

impairment losses’. In the same line of the statement of income a gain from any subsequent increase in fair value less cost to sell of

an asset is recognised, but not in excess of the cumulative impairment loss that has been recognised either for non-current asset held

for sale or previously for the non-current asset.

w) Investment properties

Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the Group are

classified as investment properties. The Group initially measures investment properties at cost, including transaction costs.

For subsequent measurements the Group has opted for a cost model which requires an investment property to be measured at

depreciated cost. Depreciation is calculated using the straight-line method based on the estimated useful life of the respective asset.

Depreciation method and rates as for Group’s property and equipment are applicable. Investment properties are periodically reviewed

for impairment.

If the recoverable value of an asset is lower than its carrying amount, the respective asset is written down to its recoverable amount.

Any subsequent reversal of the impairment loss is recognised in the statement of income, to the extent that the carrying amount of an

asset does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset

in prior periods

x) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (e.g. inventories and deferred tax assets)

to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is

estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use

that are largely independent of the cash inflows of other assets or cost generating units (CGUs).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based

on the estimated future cash flows. Discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are

recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to

reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the

asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,

if no impairment loss had been recognised.

y) Insurance business

The Group’s exposure to insurance relates to life insurance contracts. Life insurance contracts may contain both financial and

insurance risk. The part of contracts that do not contain significant insurance risk is accounted as investment contracts (unbundling).

The corresponding liability to clients is shown within deposits and borrowings from customers. Insurance reserves are shown as other

liabilities. The Group monitors the underlying assumptions in the calculations of insurance related risks regularly and seeks risk

mitigation measures such as reinsurance if the Group deems this appropriate.

An insurance contract is a contract in which the insurer assumes a significant insurance risk from the policyholder, the insurer agrees

to indemnify the policyholder for losses in the event of an insured uncertain event specified in the contract, such as the death of the

insured person. The Policyholder undertakes to pay insurance premiums in the scope, terms and amount specified in the insurance

contract, as well as to fulfil other obligations specified in the insurance contract.

Insurance reserves for annuity pension products are recognized when the premium is received in the amount of estimated future

annuity claims and related expense. The estimated contractual future cash flows from for annuity pension products (taking into

consideration assumptions about mortality, service costs and investment income) are discounted as per methodology specified by the

FCMC. Any re-estimation gain or loss in insurance reserves is recognized in income statement as Net insurance result within Net

other income.

z) Off-balance sheet financial commitments and contingent liabilities

In the ordinary course of business, the Group extends off-balance sheet financial commitments and contingent liabilities comprising

commitments to issue loans to public, commitments for unutilised credit lines and credit card limits, as well as financial guarantees

and commercial letters of credit.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 33

Off-balance sheet commitments are recognised when the Group commits the limit to the client. Financial guarantees and letters of

credit are recognised as contingent off-balance sheet liabilities when the Group is exposed to risk under the contract. Off-balance

sheet items are recognised on-balance sheet on drawdown of commitment or for guarantees and letters of credit, when these in rare

cases become payable by the Group. Commitments generally have fixed expiration dates, or other termination clauses; in some

cases, the Group may terminate these unilaterally. Since commitments may expire without being drawn down, the total committed

amounts do not necessarily represent certain future cash outflows.

On initial recognition financial guarantee contracts are measured at fair value. Subsequently, they are carried at the higher of the

amount initially recognised less cumulative amortisation over the life of the guarantee and the amount determined in accordance with

the accounting policy for provisions when enforcement of the guarantee has become probable.

The methodology for provisioning against possible losses arising from off-balance sheet financial commitments and contingent

liabilities is consistent with that described in the paragraph aa).

aa) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that

an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount

of the obligation can be made.

Loss allowance for expected credit losses on loan commitments and financial guarantee contracts is recognised as provisions. For

details on methodology of calculation, refer to section p) of the Note 3 (Impairment of loans to public and provisions for loan

commitments, guarantees and letters of credit). In addition to considerations applicable to on-balance exposures, for expected credit

loss assessment of off-balance sheet commitments a conversion and expected future use patterns, the Group’s reaction time in

identifying deteriorating exposures and a realistic past performance on timely termination of these limits is considered.

bb) Asset management

Funds managed by the Group on behalf of individuals, corporate customers, trusts and other institutions are not regarded as assets

of the Group and, therefore, are not separately included in the balance sheet. Funds under management are presented in financial

statements only for disclosure purposes. Commission for asset management is recognised on accrual basis and generally is

dependent on the volume of assets managed.

cc) Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents are defined as the amounts comprising

cash and demand balances with central banks and other credit institutions with an insignificant risk of changes in value, less demand

deposits due to credit institutions and central banks.

dd) Offsetting of assets and liabilities

Financial assets and liabilities are offset, and the net amount is reported in the balance sheet when there is a currently enforceable

legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realize the asset and settle the

liability simultaneously.

ee) Events after the reporting date

Post-period-end events that provide additional information about the Group’s position at the reporting date (adjusting events) are

reflected in the financial statements. Post-period-end events that are not adjusting events are disclosed in the notes if material.

ff) Use of estimates and judgements in the preparation of financial statements

The preparation of financial statements in conformity with International Financial Reporting Standards as adopted by EU, requires

Management to make estimates and judgements that affect the reported amounts of assets, liabilities, income and expenses and

disclosure of contingencies. The Management has applied reasonable and prudent estimates and judgments in preparing these

financial statements. Significant areas of estimation used in the preparation of the accompanying financial statements relate to

evaluation of impairment losses for assets, determination of the control of investees for consolidation purposes, evaluation of

recognisable amounts of deferred tax assets and liabilities and presentation of Kaleido Privatbank AG as discontinued operations held

for sale.

I mpairment of loans to public

The Group regularly reviews its loans to public for assessment of impairment. The estimation of impairment losses is inherently

uncertain and dependent upon many factors. Two distinct approaches are applied for expected credit loss estimation – individual

evaluation, mostly applied to large exposures, and collectively estimated expected credit losses for homogeneous groups of smaller

exposures.

On an on-going basis expected credit losses are identified promptly as a result of large loan exposures being individually monitored.

For these loan exposures expected credit losses are calculated on an individual basis with reference to expected future cash flows

including those arising from the sale of collateral. The Group uses its experienced judgement to estimate the amount of any expected

credit loses considering future economic conditions and the resulting trading performance of the borrower and the value of collateral.

As a result, the individually assessed expected credit losses can be subject to variation as time progresses and the circumstances

change or new information becomes available. The methodology and assumptions used for estimating both the amount and timing of

future cash flows are reviewed regularly to reduce any differences between expected credit loss estimates and actual credit loss

experience.

Changes in net present value of estimated future cash flows by -5% for loans to public for which expected credit losses are individually

assessed would result in no change in impairment allowance for the Bank (2021: EUR -0.23 million) as recovery estimates happen to

be based solely on collateral disposal income and EUR -0.55 million for the Group (2021: EUR -0.79 million). Change in estimated

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 34

value of collateral by -5% for loans to public for which expected credit losses are individually assessed would result in EUR -0.63

million change in impairment allowance for the Bank (2021: EUR -0.92 million) and EUR -0.95 million for the Group (2021: EUR -1.30

million).

For majority of the loans to public the Group collectively estimates impairment allowance to cover expected losses inherent in the loan

portfolio. The collective impairment assessment is based on observable data derived from historic and applied to current loans to

clients with similar credit risk characteristics. For this assessment loans to clients are segmented into homogeneous groups based on

product type (mortgage, consumer loan etc.) and customer type (private individual, legal entity, public entity etc.). Historical loss

experience is adjusted for current observable market data using the Group’s experienced judgement to reflect the effects of current

conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the

historical period that do not exist currently. The major parameters of the collectively estimates expected credit loss calculation

methodology are PD, LGD, EAD and staging outcome. The model also incorporates forward-looking macroeconomic information to

arrive to point in time instead of over the cycle expected credit loss estimates. The future credit quality of the loan portfolio for which

the expected credit losses are estimated collective is subject to uncertainties that could cause actual credit losses to differ from

expected credit losses. These uncertainties include factors such as international and local economic conditions, borrower specific

factors, industry and market trends, interest rates, unemployment rates and other external factors.

In the reporting period the management continued to recognize a significant uncertainty regarding economic risks, like Russia’s

invasion into Ukraine, which has pushed commodity and energy prices higher, accelerating global inflation and supply chain

disruptions. The adjustment for expected impact from future economic scenarios is revised correspondingly. Thus, the Group and the

Bank has recognised a prudent impairment overlay for Stage 1 and Stage 2 classified loans to public exposures. The impairment

overlay represents an additional loss reserve over the modelled ECL amounts to account for other economic uncertainties and

addresses increased uncertainty regarding the forward-looking economic conditions in the unusual environment where duration and

severity of future economic uncertainties and associated possible disruptions to the Baltic economies and customers of the Group is

uncertain. The impairment overlay accounted for economic risks which point in time ECL models calibrated on historical data, despite

being adjusted with forward-looking information, might not be fully capturing in the current unusual environment. As of 31 December

2022, impairment overlay of EUR 13.9 million for the Bank and EUR 17.1 million for the Group has been recognised to address these

modelling uncertainties (2021: EUR 1.4 million for the Bank and EUR 5.2 million for the Group). Previous impairment overlay was

reversed in 2022 since it was linked to Covid-19 economic uncertainties and those risks have decreased.

Changes in all applied LGD rates by 500 basis points would result in change in collectively estimated impairment allowance and

provisions by EUR +5.2/-5.2 million for the Bank and EUR +7.6/-7.7 million for the Group (2021: EUR +4.4/-4.6 million for the Bank

and EUR +7.3/-7.6 million for the Group). Changes in the 12-month PD rates by 100 basis points would result in change in collectively

estimated impairment allowance by EUR +6.3/-6.1 million for the Bank and EUR +8.9/-8.5 million for the Group (2021: EUR +4.6/-4.6

million for the Bank and EUR +6.4/-6.4 million for the Group if PD rates for not overdue category change by 100 basis point) and

provisions for off-balance sheet commitments and guarantees by EUR +0.5/-0.5 million for the Bank and EUR +0.5/-0.5 million for the

Group (2021: EUR +0.6/-0.6 million for the Bank and EUR +0.7/-0.7 million for the Group).

The Group has implemented forward-looking information in the measurement of expected credit losses. The forward-looking

adjustment incorporates three economic scenarios with distinct economic consequences: a base case scenario which comprises most

likely future economic development, a less likely adverse scenario and positive scenario. The GDP annual growth rates, which are

derived from a combination of internal and external macroeconomic forecasts, are one of the key variables. The key variables are

summarized below.

Base case scenario

Adverse scenario

Positive scenario

2023

2024

2023

2024

2023

2024

Latvia

GDP (annual change)

(1.5%)

3.4%

(4.4%)

3.8%

2.1%

3.4%

Unemployment rate

7.2%

6.3%

8.5%

7.7%

6.7%

5.9%

Average gross wage (annual change)

6.2%

5.5%

5.0%

7.0%

6.3%

Lithuania

GDP (annual change)

(0.9%)

3.3%

(4.7%)

3.7%

2.0%

3.3%

Unemployment rate

6.5%

6.2%

8.5%

7.6%

6.2%

5.8%

Average gross wage (annual change)

6.4%

4.4%

4.3%

4.5%

6.7%

5.2%

Estonia

GDP (annual change)

(0.9%)

4.0%

(4.8%)

3.7%

1.7%

4.0%

Unemployment rate

6.6%

5.6%

8.0%

7.4%

5.9%

5.2%

Average gross wage (annual change)

4.9%

4.6%

3.7%

4.7%

5.4%

The current implementation, based on an expert judgement, weights base case scenario with 55% likelihood, the adverse scenario at

35% likelihood and positive scenario at 10% likelihood (2021: 60% base case scenario vs. 40% adverse scenario). The 55% / 35% /

10% weighted augmented scenario is used for forward-looking adjustment. If the weighting of the adverse scenario was to increase

to 40%, the expected credit loss allowance of the Bank would increase by EUR 0.5 million and for the Group by EUR 0.7 million as of

31 December 2022. If the weighting of the base case scenario was to increase to 100%, the expected credit loss allowance of the

Bank would decrease by EUR 2.9 million and for the Group by EUR 3.9 million as of 31 December 2022. As of 31 December 2021,

the weighting of base case and adverse scenarios was 60% versus 40%. If the weighting of the adverse scenario was to increase to

45%, the expected credit loss allowance of the Bank would increase by EUR 1.2 million and for the Group by EUR 1.8 million as of

31 December 2021. If the weighting of the base case scenario was to increase to 100%, the expected credit loss allowance of the

Bank would decrease by EUR 9.1 million and for the Group by EUR 13.7 million as of 31 December 2021.

Impairment of other assets

The Bank and the Group at the end of each reporting period assesses whether there is any indication that a non-financial asset may

be impaired other than inventory and deferred tax. If any such indication exists, the recoverable amount of the particular asset or cash

AS Citadele banka 
Financial statements | Notes  
AS Citadele banka Annual report for the year ended 31 December 2022    35 
generating unit is estimate. Recoverable amount estimates depend on uncertainties in future free cash flow estimates and discount 
rates applied. For more details on the approach and key assumptions in recoverable amount estimates of the Bank’s investments in 
subsidiaries refer to Note 19 (Investments in Related Entities). 
Consolidation group 
The Group consolidates all entities where it controls the investee. The Group controls an investee when it is exposed, or has rights, 
to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. 
For list of investees included in the consolidation group refer to Note 19 (Investments in Related Entities). For investments in securities 
which are not consolidated refer to Note 18 (Equity and Other Financial Instruments).  
In the ordinary course of business IPAS CBL Asset Management provides management services to several funds where its interest 
held is only fees from servicing. The Bank has made an investment solely with a view to diversify its securities portfolio also in funds 
managed by IPAS CBL Asset Management. According to the prospectus of the funds, the investment decisions are made collectively 
by IPAS CBL Asset Management Investment Committee. The Bank has no intention to participate in decision making regarding the 
asset allocation of any of the funds. Moreover, interfering with Investment Committee's decision-making process would be against the 
corporate governance principles maintained by that Bank since its inception. As such, the Bank believes it does not have the control 
over the funds, as per IFRS 10, and the funds should not be consolidated. 
Deferred tax assets and liabilities 
The future taxable profits and the amount of tax benefits that are probable in the future are based on a medium-term financial forecast 
prepared by management and extrapolated results thereafter. The aforementioned forecasts indicate that the Bank will have sufficient 
taxable profits in the future periods to realise the recognised deferred tax asset. For more details refer to Note 13 (Taxation). 
Presentation of Kaleido Privatbank AG as discontinued operations held for sale 
In January 2022, AS Citadele banka entered into a binding agreement with Trusted Novus Bank Limited regarding the sale of its Swiss 
subsidiary – Kaleido Privatbank AG. The closing is subject to regulatory approvals. As the conditions indicate that the investment will 
be recovered principally through a sale transaction rather than through continuing operations, Kaleido Privatbank AG is presented as 
discontinued operations as of period end. 
NOTE 4.  OPERATING SEGMENTS 
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. 
The chief operating decision maker is the person or the group that allocates resources to and assesses the performance of the 
operating segments of the Group. The Management Board of the Bank is the chief operating decision maker. 
 
All transactions between operating segments are on an arm’s length basis. Funds Transfer Pricing (FTP) adjusted net interest income 
of each operating segment is calculated by applying internal transfer rates to the assets and the liabilities of the segment. Maturity, 
currency and timing of the transaction are components of the internal transfer rate calculation. Income and expense are reported in 
the segment by originating unit and at estimated fair price. Both direct and indirect expenses are allocated to the business segments, 
including overheads and non-recurring items. The indirect expense from internal services is charged to the internal consumers of the 
service and credited to provider of the service. The internal services are charged at estimated fair price or at full cost.  
 
The comparative information as of 31 December 2021 and for the twelve months ended 31 December 2021 have been restated for 
comparability by applying the most recent segmentation methodology. Changes mostly relate to redistribution of previously separately 
reported exposures originated by SIA Citadele Leasing, SIA Citadele Factoring, UAB Citadele Factoring and OU Citadele Factoring 
into Private customers, SME, Corporate and Wealth segments. 
Main business segments of the Group are: 
Retail Private 
Private individuals serviced in Latvia, Lithuania and Estonia. Operations of the segment include full banking, leasing and advisory 
services provided through branches, internet bank and mobile banking application. 
Private affluent 
Private banking services provided to clients serviced in Latvia, Lithuania and Estonia.  
Retail SME 
Small and medium-sized companies in Latvia, Lithuania and Estonia serviced through branches, internet bank and mobile banking 
application. 
Corporate 
Large customers serviced in Latvia, Lithuania and Estonia. Yearly turnover of the customer is above EUR 7 million or total risk 
exposure with Citadele Group is above EUR 2 million or the customer needs complex financing solutions. 
Asset management 
Advisory, investment and wealth management services provided to clients serviced in Latvia, Lithuania and Estonia. This segment 
includes operations of IPAS CBL Asset Management, AS CBL Atklātais Pensiju Fonds and AAS CBL Life.  
Other 
Group’s treasury functions and other business support functions, including results of the subsidiaries of the Group operating in non- 
financial sector. This comprises discontinued operations, namely operations of Kaleido Privatbank AG (a Swiss registered banking 
subsidiary) which Citadele has agreed to sell. Refer to Note 21 (Discontinued Operations). 
   

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 36

Segments of the Group

Group 2022, EUR thousands

Reportable segments

Other

Total

Retail

Private

affluent

Retail

SME

Corporate

Asset

Manage-

ment

Interest income

51,656

1,849

30,750

45,786

263

7,152

137,456

Interest expense

(3,795)

(1,575)

(1,548)

(2,809)

(148)

(8,732)

(18,607)

Net interest income

47,861

274

29,202

42,977

115

(1,580)

118,849

Fee and commission income

22,276

3,438

15,815

14,110

6,543

3,846

66,028

Fee and commission expense

(12,779)

(1,114)

(5,671)

(8,001)

(447)

(370)

(28,382)

Net fee and commission income

9,497

2,324

10,144

6,109

6,096

3,476

37,646

Net financial income

1,294

1,029

2,760

2,352

(1,370)

2,538

8,603

Net other income

(2,017)

(446)

(165)

(264)

5,721

248

3,077

Operating income

56,635

3,181

41,941

51,174

10,562

4,682

168,175

Net funding allocation

1,213

2,521

(3,007)

(859)

FTP adjusted operating income

57,848

5,702

42,028

48,167

10,607

3,823

168,175

Net credit losses

(14,327)

(627)

(983)

(9,721)

1,947

(23,704)

Net result from continuous

operations before operating

expense

43,521

5,075

41,045

38,446

10,614

5,770

144,471

Not allocated income and expense,

net

(91,643)

Operating profit from continuous

operations, before tax

52,828

Group 2021, EUR thousands (Reclassified for comparability)

Reportable segments

Other

Total

Retail

Private

affluent

Retail

SME

Corporate

Asset

Manage-

ment

Interest income

44,671

1,723

28,185

37,299

239

10,521

122,638

Interest expense

(1,089)

(803)

(19)

(324)

(180)

(13,244)

(15,659)

Net interest income

43,582

920

28,166

36,975

(2,723)

106,979

Fee and commission income

18,006

4,559

12,633

12,062

8,755

1,969

57,984

Fee and commission expense

(11,279)

(1,081)

(4,346)

(6,131)

(559)

(450)

(23,846)

Net fee and commission income

6,727

3,478

8,287

5,931

8,196

1,519

34,138

Net financial income

810

896

2,218

1,530

295

1,038

6,787

Net other income

(636)

(196)

753

2,003

1,115

(1,212)

1,827

Operating income

50,483

5,098

39,424

46,439

9,665

(1,378)

149,731

Net funding allocation

(1,318)

494

(990)

(1,647)

3,450

FTP adjusted operating income

49,165

5,592

38,434

44,792

9,676

2,072

149,731

Net credit losses

(5,894)

336

908

(1,707)

(7)

4,946

(1,418)

Net result from continuous

operations before operating

expense

43,271

5,928

39,342

43,085

9,669

7,018

148,313

Not allocated income and expense,

net

(84,338)

Operating profit from continuous

operations, before tax

63,975

Group as of 31/12/2022, EUR thousands

Reportable segments

Other

(including

discontinued

operations)

Total

Retail

Private

affluent

Retail

SME

Corporate

Asset

Manage-

ment

Assets

Cash, balances at central banks

532,030

Loans to credit institutions

6,397

42,044

48,441

Debt securities

44,552

42,302

1,505,749

1,592,603

Loans to public

1,199,979

51,895

629,682

1,060,588

4,550

19,784

2,966,478

Equity instruments

1,029

Other financial instruments

27,372

1,101

28,473

All other assets

4,939

230,281

235,225

Total segmented assets

1,199,979

51,895

629,682

1,105,145

85,560

2,332,018

5,404,279

Liabilities

Deposits from banks

469,736

Deposits from customers

1,550,387

511,406

736,882

1,056,760

70,425

54,401

3,980,261

Debt securities issued

259,225

All other liabilities

125

56,889

213,776

270,839

Total segmented liabilities

1,550,387

511,406

736,931

1,056,885

127,314

997,138

4,980,06 1

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 37

Group as of 31/12/2021, EUR thousands (Reclassified for comparability)

Reportable segments

Other

(including

discontinued

operations)

Total

Retail

Private

affluent

Retail

SME

Corporate

Asset

Manage-

ment

Assets

Cash, balances at central banks

371,025

Loans to credit institutions

3,201

55,541

58,742

Debt securities

49,547

48,445

1,703,728

1,801,720

Loans to public

1,103,479

46,845

584,912

940,293

25,980

2,701,509

Equity instruments

1,279

Other financial instruments

34,632

7,400

42,032

All other assets

1,953

6,799

69,502

78,254

Total segmented assets

1,103,479

46,845

584,912

991,793

93,077

2,234,455

5,054,561

Liabilities

Deposits from banks

479,235

Deposits from customers

1,466,577

526,854

628,860

962,744

71,360

157,468

3,813,863

Debt securities issued

258,895

All other liabilities

125

44,969

60,399

105,493

Total segmented liabilities

1,466,577

526,854

628,860

962,869

116,329

955,997

4,657,486

NOTE 5. INTEREST INCOME AND EXPENSE

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Interest income calculated using the effective interest method:

Financial instruments at amortised cost:

Loans to public

81,472

69,212

105,993

86,064

Debt securities

4,616

2,996

4,616

2,996

Cash balances at and lending to/from central banks

and credit institutions (including TLTRO-III)

3,413

3,083

3,419

3,090

Deposits from public at negative interest rates

834

383

912

466

Debt securities at fair value through other comprehensive

income

1,033

1,012

776

842

Interest income on finance leases (part of loans to public)

46,088

45,952

Total interest income

137,456

122,638

115,716

93,458

Interest expense on:

Financial instruments at amortised cost:

Deposits and borrowing from public

(7,839)

(8,813)

(7,823)

(8,130)

Debt securities issued

(6,821)

(3,952)

(6,821)

(3,952)

Deposits from credit institutions and central banks

(including TLTRO-III)

(951)

(104)

(1,003)

(276)

Deposits to central banks and other assets at negative

interest rates

(676)

(863)

(616)

(862)

Financial liabilities at fair value through profit or loss

Deposits and borrowing from public

(89)

(145)

Lease liabilities

(43)

(58)

(38)

(50)

Other interest expense

(2,188)

(1,724)

(2,188)

(1,724)

Total interest expense

(18,607)

(15,659)

(18,489)

(14,994)

Net interest income

118,849

106,979

97,227

78,464

Effective interest rate on high-quality liquid assets for significant part of the reporting period has been negative in certain central bank,

central government and credit institution exposures. As the interest resulting from a negative effective interest rate on financial assets

reflects an outflow of economic benefits, this is presented as interest expense. Similarly, an inflow of economic benefits from liabilities

with negative effective interest rates (including TLTRO-III financing) is presented as interest income.

EUR thousands

2022

2021

2022

2021

Group

Bank

Interest income recognised on credit impaired assets

3,114

3,747

1,677

1,458

Credit impaired financial assets are defined as all stage 3 classified assets and POCI classified assets with existing default triggers.

These besides overdue or specifically impaired assets also include non-overdue, non-restructured assets under monitoring period

where previously default indications were observed.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 38

NOTE 6. FEE AND COMMISSION INCOME AND EXPENSE

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Fee and commission income:

Cards

43,301

32,637

43,303

32,638

Payments and transactions

11,062

10,741

11,088

10,757

Asset management and custody

6,758

9,078

1,680

1,797

Securities brokerage

521

564

523

577

Other fees

2,038

1,810

2,004

1,610

Total fee and commission income from contracts with

customers

63,680

54,830

58,598

47,379

Guarantees, letters of credit and loans

2,348

3,154

1,783

2,341

Total fee and commission income

66,028

57,984

60,381

49,720

Fee and commission expense on:

Cards

(23,238)

(19,260)

(23,233)

(19,254)

Payments and transactions

(3,625)

(3,201)

(3,625)

(3,161)

Asset management, custody and securities brokerage

(748)

(918)

(738)

(918)

Other fees

(771)

(467)

(322)

(64)

Total fee and commission expense

(28,382)

(23,846)

(27,918)

(23,397)

Net fee and commission income

37,646

34,138

32,463

26,323

NOTE 7. NET FINANCIAL INCOME

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Foreign exchange trading, revaluation and related

derivatives

9,583

6,864

9,496

6,821

Non-trading assets and liabilities at fair value through profit

or loss

(824)

443

783

381

Assets at fair value through other comprehensive income

(1,519)

428

(1,519)

428

Assets at amortised cost

(16)

Modifications in cash flows which do not result in

derecognition

1,336

(932)

1,336

(932)

Total net financial income

8,603

6,787

10,123

6,682

NOTE 8. NET OTHER INCOME

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Compensation for fulfilment of the TLTRO-III required

government obligations (Note 23)

993

2,744

993

2,744

Operating lease income

1,835

2,088

Gross Insurance income

6,307

1,713

Dividend income

8,713

Share of the profit of investments accounted for using the

equity method

Other income

773

1,057

2,049

2,072

Total other income

9,937

7,644

11,755

4,858

Supervisory fees

(2,988)

(1,759)

(2,898)

(1,605)

Depreciation of assets under operating lease (Note 20)

(1,467)

(1,578)

Share of the profit or loss of investments accounted for using

the equity method

(89)

Gross insurance claims paid

(71)

(19)

Other expenses

(2,245)

(2,461)

(1,503)

(1,471)

Total other expense

(6,860)

(5,817)

(4,490)

(3,076)

Total net other income

3,077

1,827

7,265

1,782

Other income includes net result from disposal of repossessed collaterals and other miscellaneous items which may not be considered

interest or fee and commission income. Supervisory fees include annual and quarterly fees payable to Financial and Capital Market

Commission, European Central Bank, Single Resolution Board and similar. These are directly dependent on the size of the banking

business (mostly total assets). Higher net insurance result in 2022 is primarily discounting gains from increases in interest rates.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 39

NOTE 9. STAFF COSTS

Personnel costs include remuneration for work to the personnel, related social security contributions, bonuses and costs of other

benefits. Other personnel expense includes health insurance, training, education and similar expenditure.

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Remuneration:

- management

4,178

2,893

3,319

1,948

- other personnel

44,787

42,899

37,770

36,036

Total remuneration for work

48,965

45,792

41,089

37,984

Social security and solidarity tax contributions:

- management

651

469

447

- other personnel

8,354

8,014

7,036

6,738

Total social security and solidarity tax contributions

9,005

8,665

7,505

7,185

Other personnel expense

901

852

776

731

Total personnel expense

58,871

55,309

49,370

45,900

Number of full-time equivalent employees at the period end

- continuous operations

1,329

1,310

1,113

1,100

- discontinued operations

Non-share-based remuneration with deferred pay-out

Part of the remuneration for work is deferred up to a one-year period and subsequent pay-outs may be conditional. As at 31 December

2022 the Group and the Bank has a compulsory non-share-based deferred remuneration commitment (including related social security

and solidarity tax contributions) to its employees in the amount of EUR 745 thousand and EUR 601 thousand which will become

payable in 2023 if certain conditions are met (2021: EUR 407 thousand and EUR 294 thousand payable in 2022, respectively).

Share-based long-term incentive plans

Citadele has opened several share-based long-term incentive plans for its employees starting from 2018. Under the equity-based

long-term incentive plans active agreements as of the period end comprise 2,700 thousand of share options (2021: 2,365) with value

for accounting purposes of EUR 6.4 million (2021: EUR 5.0 million). From total active agreements EUR 4.7 million are granted to the

management (2021: EUR 3.9 million). The expense for share-based incentive plans is recognised on a straight-line basis over the

period of the remuneration program as intention is to receive services from employees over the whole period and in the reporting

period amounted to EUR 1.76 million (2021: EUR 1.05 million).

In the reporting period 919 thousand options were awarded and 138 thousand options were forfeited. None of the options outstanding

are exercisable as of 31 December 2022. In the reporting period 464 thousand share options, previously awarded to the employees

of the Bank, vested. Refer to Note 27 (Share Capital) for additional details.

To qualify for the share options (vesting requirement), among other conditions the participant in most cases is required to remain

employed until the end of the respective deferral period. The personnel options were issued in line with the meaning of Article 2481

of the Latvian Commercial Law. Each option has the following parameters: registered share with the nominal value of EUR 1 (one

euro); convertible to the ordinary shares of Citadele (all Citadele’s ordinary shares have equal voting rights, equal rights to dividend

and equal liquidation quota), an exercise price of null euros, vesting dates are predetermined. Clawback and malus provisions apply

in the event of a material misstatement, an act of gross misconduct or an error in the assessment of performance targets. For options

granted performance is measured over a pre-agreed period ranging from three-years to five-years. The expense is recognised as the

service is rendered. At the end of the performance measurement period, the Remuneration Committee of the Supervisory Board has

absolute discretion to determine the extent to which the awards will vest, if at all, on account of underlying Group, individual and share

price performance. The Remuneration Committee of the Supervisory Board may, in its absolute discretion, adjust upwards or

downwards and including to nil the number of options which would otherwise vest. Performance targets relate to both financial and

non-financial measures linked to the long-term business strategy of the Group, including but not limited to: Group net income, return

on capital, and strategic objectives of the Group.

NOTE 10. OTHER OPERATING EXPENSES

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Information technologies and communications

(7,705)

(5,858)

(7,014)

(5,002)

Consulting and other services

(6,307)

(6,440)

(4,848)

(6,182)

Rent, premises and real estate

(2,514)

(2,594)

(2,364)

(2,313)

Advertising and marketing

(3,834)

(2,594)

(3,641)

(2,468)

Non-refundable value added tax

(2,012)

(1,985)

(1,884)

(1,842)

Other

(1,603)

(1,240)

(1,344)

(953)

Total other expenses

(23,975)

(20,711)

(21,095)

(18,760)

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 40

Audit and other fees paid to the Group’s independent audit companies (excluding VAT, including fees for subsidiaries outside EU)

EUR thousands

2022

2021

2022

2021

Group

Bank

Annual and interim audit fees

467

557

124

187

Other audit and similar fees

Tax advisory fees

Other advisory, training, and similar fees

NOTE 11. NET CREDIT LOSSES

Total net impairment allowance charged to the income statement

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Loans to credit institutions

(303)

Debt securities

104

(806)

(799)

Loans to public

(24,789)

(2,942)

(27,160)

(12,895)

Including impairment overlay (Note 3, section ff)

(11,913)

(1,050)

(12,463)

1,802

Loan commitments, guarantees and letters of credit

(1,049)

(1,657)

(954)

(1,747)

Recovered written-off assets

2,333

3,966

2,141

3,687

Total net losses on financial instruments

(23,704)

(1,418)

(26,179)

(11,742)

Allowances for credit losses are recognised based on the future loss expectations. The forward-looking information in the

measurement of expected credit losses is implemented through adjustment for future economic development scenarios. As a result

of events related to Covid-19 previously and more recent new risks, like Russia’s invasion into Ukraine, which has pushed commodity

and energy prices higher, accelerating global inflation and supply chain disruptions, the adjustment for expected impact from future

economic scenarios is revised correspondingly. Due to the forward looking nature of the credit loss estimation, the increase in loss

allowances does not necessarily represent an observable deterioration in the current credit quality of the loan portfolio (for detail refer

to Note 16 (Loans to Public)), but is more a representation of a deterioration in the forward looking economic scenarios component.

The Group and the Bank has recognised an impairment overlay for Stage 1 and Stage 2 classified loans to public exposures. The

impairment overlay addresses increased uncertainty regarding the forward-looking economic conditions in the unusual environment

where duration and severity of future economic uncertainties and associated possible disruptions to the Baltic economies and

customers of the Group is uncertain. The impairment overlay accounted for economic risks which point in time ECL models calibrated

on historical data, despite being adjusted with forward-looking information, might not be fully capturing.

When a loan is fully or partially written-off, the claim against the borrower normally is not forgiven. From time to time previously written-

off assets are recovered due to repayment, sale of pool of overdue assets to companies specialising in recoveries of balances in

arrears, or as a result of other resolution. Such recoveries are reported as recovered written-off assets.

Classification of impairment stages

Stage 1 – Financial instruments without significant increase in credit risk since initial recognition

Stage 2 – Financial instruments with significant increase in credit risk since initial recognition but not credit-impaired

Stage 3 – Credit-impaired financial instruments

Changes in the allowances for credit losses and provisions

Group, EUR thousands

Opening

balance

01/01/2022

Charged to

statement

of income

Write-offs

of allow-

ances

Other

adjust-

ments

Closing

balance

31/12/2022

Stage 1

Loans to credit institutions

303

(11)

385

Debt securities

2,015

(104)

(1,144)

(59)

708

Loans to public

35,204

18,400

(320)

53,284

Including impairment overlay

5,180

5,717

10,897

Loan commitments, guarantees and letters of credit

3,378

1,213

(63)

4,528

Total stage 1 credit losses and provisions

40,690

19,812

(1,144)

(453)

58,905

Stage 2

Loans to public

10,702

5,759

285

16,746

Including impairment overlay

6,196

Loan commitments, guarantees and letters of credit

358

(201)

158

Total stage 2 credit losses and provisions

11,060

5,558

286

16,904

Stage 3

Loans to public

35,709

630

(5,213)

5,353

36,479

Loan commitments, guarantees and letters of credit

(1)

134

Total stage 3 credit losses and provisions

35,807

667

(5,213)

5,352

36,613

Total allowances for credit losses and

provisions

87,557

26,037

(6,357)

5,185

112,422

Including for debt securities classified at fair

value through other comprehensive income

136

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 41

Total Group’s provisions of EUR 4,920 thousand (2021: EUR 3,934 thousand) as of the period end comprise of ECL allowances for

loan commitments, guarantees and letters of credit of EUR 4,820 thousand (2021: EUR 3,834 thousand) and other Non-ECL

provisions of EUR 100 thousand (2021: EUR 100 thousand) disclosed in Note 12 (Other Impairment Losses and Other Provisions).

Total Bank’s provisions of EUR 4,838 thousand (2021: EUR 3,882 thousand) as of the period end comprise EUR 4,738 thousand

(2021: EUR 3,781 thousand) for loan commitments, guarantees and letters of credit and EUR 100 thousand (2021: EUR 100 thousand)

for other Non-ECL provisions.

For purchased or originated credit impaired (POCI) loans only the cumulative changes in the lifetime expected credit losses since

purchase by Citadele or the most recent re-origination is recognised as a loss allowance. Favourable changes in lifetime expected

credit losses are recognised as an impairment gain, even if the lifetime expected credit losses to be recognised are less than the

amount of expected credit losses that were included in the estimated cash flows on the designation as POCI. In 2022, EUR 4.1 million

from “other adjustments” in the table above, relates to this. For POCI loans acquired in business combinations, the initial recognition

date in the Group’s consolidated accounts is the purchase date of the subsidiary.

Increase in the stock of impairment in 2022 is driven to lesser extent by increase in gross loans outstanding (see Note 16), but more

a result of prudent provisioning and increase in impairment overlay (see above and section ff) of the Note 3).

Group, EUR thousands (Reclassified)

Opening

balance

01/01/2021

Charged to

statement

of income

Write-offs

of allow-

ances

Acquisition

and other

adjust-

ments

Closing

balance

31/12/2021

Stage 1

Loans to credit institutions

104

(21)

Debt securities

1,191

822

2,015

Loans to public

19,662

8,196

7,346

35,204

Including impairment overlay

4,130

(1,834)

2,884

5,180

Loan commitments, guarantees and letters of credit

1,903

1,473

3,378

Total stage 1 credit losses and provisions

22,860

10,470

7,360

40,690

Stage 2

Loans to public

4,058

(167)

6,811

10,702

Loan commitments, guarantees and letters of credit

317

358

Total stage 2 credit losses and provisions

4,099

150

6,811

11,060

Stage 3

Loans to public

35,720

(4,971)

(9,346)

14,306

35,709

Loan commitments, guarantees and letters of credit

167

(69)

Total stage 3 credit losses and provisions

35,887

(5,040)

(9,346)

14,306

35,807

Total allowances for credit losses and

provisions

62,846

5,580

(9,346)

28,477

87,557

Including for debt securities classified at fair

value through other comprehensive income

135

136

Including for loans of SIA Citadele Leasing

15,286

In the year ended 31 December 2021, the increase of EUR 15.3 million in the Group’s consolidated period end balance of allowances

for credit losses is a result of the recent acquisition of SIA UniCredit Leasing (renamed to SIA Citadele Leasing), while the increase

of EUR 1.1 million in the Bank’s standalone stock of allowances for credit losses and provisions relates to credit lines extended to the

recently acquired subsidiary. EUR 26.8 million from the total “Acquisition and other adjustments” relate to SIA UniCredit Leasing

acquisition.

Bank, EUR thousands

Opening

balance

01/01/2022

Charged to

statement

of income

Write-offs of

allowances

Other

adjust-

ments

Closing

balance

31/12/2022

Stage 1

Loans to credit institutions

303

(11)

385

Debt securities

1,927

(97)

(1,144)

686

Loans to public

23,184

17,945

41,130

Including impairment overlay (Note 3, section ff)

1,431

6,274

7,705

Loan commitments, guarantees and letters of credit

3,325

1,172

4,498

Total stage 1 credit losses and provisions

28,529

19,323

(1,144)

(9)

46,699

Stage 2

Loans to public

8,873

4,548

13,421

Including impairment overlay (Note 3, section ff)

6,189

Loan commitments, guarantees and letters of credit

358

(244)

115

Total stage 2 credit losses and provisions

9,231

4,304

13,536

Stage 3

Loans to public

32,544

4,667

(5,017)

1,379

33,573

Loan commitments, guarantees and letters of credit

125

Total stage 3 credit losses and provisions

32,642

4,693

(5,017)

1,380

33,698

Total allowances for credit losses and

provisions

70,402

28,320

(6,161)

1,372

93,933

Including for debt securities classified at fair value

through other comprehensive income

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 42

Bank, EUR thousands

Opening

balance

01/01/2021

Charged to

statement

of income

Write-offs of

allowances

Other

adjust-

ments

Closing

balance

31/12/2021

Stage 1

Loans to credit institutions

104

(12)

Debt securities

1,127

799

1,927

Loans to public

17,384

5,818

(18)

23,184

Including impairment overlay (Note 3, section ff)

3,233

(1,802)

1,431

Loan commitments, guarantees and letters of credit

1,825

1,499

3,325

Total stage 1 credit losses and provisions

20,440

8,104

(15)

28,529

Stage 2

Loans to public

3,901

4,972

8,873

Loan commitments, guarantees and letters of credit

317

358

Total stage 2 credit losses and provisions

3,942

5,289

9,231

Stage 3

Loans to public

34,475

2,105

(5,754)

1,718

32,544

Loan commitments, guarantees and letters of credit

167

(69)

Total stage 3 credit losses and provisions

34,642

2,036

(5,754)

1,718

32,642

Total allowances for credit losses and

provisions

59,024

15,429

(5,754)

1,703

70,402

Including for debt securities classified at fair value

through other comprehensive income

Transfers of gross loans to customers between impairment stages

Group, EUR thousands

Gross loans where the stage has changed over the period:

from

Stage 1 to

Stage 2

from

Stage 2 to

Stage 1

from

Stage 2 to

Stage 3

from

Stage 3 to

Stage 2

from

Stage 1 to

Stage 3

from

Stage 3 to

Stage 1

Transfer on 01/01/2022 to 31/12/2022

113,081

39,007

1,423

1,059

4,458

1,094

Transfer on 01/01/2021 to 31/12/2021

(excluding acquisitions)

102,533

13,446

11,359

985

13,937

1,380

NOTE 12. OTHER IMPAIRMENT LOSSES AND OTHER PROVISIONS

Changes in impairment allowances for investments in subsidiaries, tangible, intangible and other assets

Group, EUR thousands

Opening

balance

01/01/2022

Charged to

statement of

income

Write-offs and

other

adjustments

Closing

balance

31/12/2022

Other impairment allowances and other provisions

Tangible and intangible assets (Note 20)

353

(146)

207

Other assets

1,542

1,619

Non-ECL provisions

100

Total other impairment allowance and other provisions

1,995

(137)

1,926

Group, EUR thousands

Opening

balance

01/01/2021

Charged to

statement of

income

Write-offs and

other

adjustments

Closing

balance

31/12/2021

Other impairment allowances and other provisions

Tangible and intangible assets (Note 20)

353

Other assets

1,433

198

(89)

1,542

Non-ECL provisions

100

Total other impairment allowance and other provisions

1,886

198

(89)

1,995

Bank, EUR thousands

Opening

balance

01/01/2022

Charged to

statement of

income

Write-offs and

other

adjustments

Closing

balance

31/12/2022

Other impairment allowances and other provisions

Tangible and intangible assets (Note 20)

342

(135)

207

Investments in related entities

22,923

(288)

(9,617)

13,018

Other assets

1,467

1,566

Non-ECL provisions

100

Total other impairment allowance and other provisions

24,832

(210)

(9,731)

14,891

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 43

Bank, EUR thousands

Opening

balance

01/01/2021

Charged to

statement of

income

Write-offs and

other

adjustments

Closing

balance

31/12/2021

Other impairment allowances and other provisions

Tangible and intangible assets (Note 20)

342

Investments in related entities

24,177

(1,140)

(114)

22,923

Other assets

1,350

199

(82)

1,467

Non-ECL provisions

100

Total other impairment allowance and other provisions

25,969

(941)

(196)

24,832

For more details on the investments in subsidiaries refer to Note 19 (Investments in Related Entities).

NOTE 13. TAXATION

Corporate income tax expense

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Current corporate income tax

2,437

816

438

318

Deferred income tax

(119)

749

Total corporate income tax expense

2,318

1,565

438

318

In Latvia and Estonia corporate income tax (CIT) is payable when the profits are distributed, not when the profits are earned.

Correspondingly, the deferred tax is calculated at a tax rate which applies to undistributed earnings, which is 0%. The effective tax

rate in the reporting period for the Group and the Bank in Latvia and Estonia was close to 0%. In Latvia, incremental CIT expense

does not arise on dividend distribution from retained earnings generated under the previous tax regime (EUR 81.8 million for the

Bank), and there is no expiry date for this distribution right. In Latvia, for dividend distributions from profits earned under the current

tax regime, a 20% CIT rate applies and is calculated as 0.2/0.8 from net distributed dividend. In 2022, in Latvia intragroup dividends

of EUR 8.7 million were distributed on which tax at a transitional reduced rate of EUR 1.1 million was payable. In other jurisdictions

where the Group operates, earnings are taxable when earned. The effective tax rate for Lithuanian operations was less than 10%,

primarily due to a positive impact from revised estimates of recognisable unutilized tax loss. For the Group EUR 1.2 million of the total

corporate income tax expense for the reporting period relates to Lithuania operations. As at period end, a part of the Group’s and

Bank’s unutilised tax loss is not recognised for deferred tax asset purposes as there is uncertainty about availability of sufficient future

taxable profits with which to offset accumulated tax loss at the level of the particular entity. The recognised deferred tax asset mostly

represents unutilised tax loss in Lithuania.

Income tax assets and liabilities

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Deferred income tax assets

2,478

2,676

2,179

Current income tax assets

1,822

1,927

1,116

871

Tax assets

4,300

4,603

3,295

3,050

Deferred income tax liabilities

(375)

(376)

Current income tax liabilities

(1,204)

(197)

(33)

(189)

Tax liabilities

(1,579)

(573)

(33)

(189)

The Group has recognised a deferred tax liability of EUR 0.4 million as in Estonia it anticipates paying out dividends to Latvia. These

dividends would become taxable at distribution.

Change in net deferred corporate income tax asset / (liability)

EUR thousands

2022

2021

2022

2021

Group

Bank

As at the beginning of the period

2,300

1,923

2,179

Integration of SIA UniCredit Leasing

914

Charge to statement of income

119

(749)

Charge to statement of comprehensive income

212

Transfer to discontinued operations held for sale

(316)

Net deferred income tax asset at the period end

2,103

2,300

2,179

Group, EUR thousands

Opening

balance

31/12/2021

Recognised

in statement

of income

Transfer to

discontinued

operations

Closing

balance

31/12/2022

Deferred income and accrued expense

443

(106)

337

Recognised unutilised tax loss carry-forward

1,786

135

1,921

Fair value amortisation on the acquired loan portfolio

448

(227)

221

Expected distribution of retained earnings

(375)

Other items, net

(2)

317

(316)

(1)

Deferred income tax assets, net

2,300

(119)

(316)

2,103

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 44

Group, EUR thousands

Opening

balance

31/12/2020

Integration

of SIA

UniCredit

Leasing

Recognised

in statement

of OCI

Recognised

in statement

of income

Closing

balance

31/12/2021

Deferred income and accrued expense

405

117

(79)

443

Recognised unutilised tax loss carry-forward

1,978

(192)

1,786

Fair value adjustment on the acquired loan

portfolio

797

(349)

448

Expected distribution of retained earnings

(375)

Other items, net

(85)

212

(129)

(2)

Deferred income tax assets, net

1,923

914

212

(749)

2,300

Bank, EUR thousands

Opening

balance

31/12/2021

Recognised

in statement

of income

Recognised

in statement

of OCI

Closing

balance

31/12/2022

Deferred income and accrued expense

393

(135)

258

Recognised unutilised tax loss carry-forward

1,786

135

1,921

Deferred income tax assets, net

2,179

Bank, EUR thousands

Opening

balance

31/12/2020

Recognised

in statement

of income

Recognised

in statement

of OCI

Closing

balance

31/12/2021

Deferred income and accrued expense

332

393

Recognised unutilised tax loss carry-forward

1,847

(61)

1,786

Deferred income tax assets, net

2,179

Reconciliation of the pre-tax profit to the corporate income tax expense

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Profit before corporate income tax from continuous

operations

52,828

63,975

42,335

30,174

Corporate income tax (at 20%)

10,566

12,795

8,467

6,035

Undistributed earnings taxable on distribution

(7,285)

(9,216)

(7,489)

(4,939)

Effect of tax rates in foreign jurisdictions

(475)

(765)

(231)

(255)

Non-taxable income

(1,508)

(2,384)

(440)

(295)

Non-deductible expense

1,159

1,715

243

286

Expected distribution of retained earnings

Other tax differences, net (incl. changes in unrecognised

deferred tax asset)

(139)

(580)

(112)

(514)

Total effective corporate income tax from continuous

operations

2,318

1,565

438

318

Part of the Group’s unutilised tax losses are not recognised for deferred tax asset purposes as there is uncertainty about availability

of sufficient future taxable profits with which to offset accumulated tax losses at particular subsidiary’s level. The recognisable amount

assessment is based on reasonably certain 3 year forecast of the respective subsidiary’s ability to utilised tax losses. Most of the

recognised deferred tax asset represents unutilised tax loss carry forward in Lithuania.

NOTE 14. CASH AND CASH BALANCES AT CENTRAL BANKS

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Cash

46,296

39,942

46,296

39,942

Balances with the Bank of Latvia

263,161

234,860

263,161

234,860

Balances with other central banks

222,573

96,223

222,573

86,824

Total cash and balances with central banks

532,030

371,025

532,030

361,626

Credit institutions should comply with the compulsory reserve requirement calculated based on attracted funding. The Bank’s

compulsory minimum reserve must be exceeded by a credit institution’s average monthly balance on its correspondent account with

the central bank. Similar requirements also apply to the funding attracted by the banking subsidiary in Switzerland (classified as

discontinued operations). During the reporting period, the Group’s was in compliance with this requirement. Demand deposits with

other central banks include balances with central banks of Lithuania, Switzerland and Estonia. In the reporting period no amounts due

from central banks were overdue.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 45

NOTE 15. DEBT SECURITIES

Debt securities by credit rating grade, classification and profile of issuer

Group, EUR thousands

31/12/2022

31/12/2021

At fair value

through other

comprehensive

income

amortised

cost

Total

At fair value

through other

comprehensive

income

amortised

cost

Total

Investment grade:

AAA/Aaa

32,402

110,767

143,169

60,706

98,933

159,639

AA/Aa

17,929

239,181

257,110

37,904

268,521

306,425

161,484

951,810

1,113,294

225,476

1,024,958

1,250,434

BBB/Baa

10,500

23,770

34,270

16,118

19,059

35,177

Lower ratings or unrated

208

44,552

44,760

497

49,548

50,045

Total debt securities

222,523

1,370,080

1,592,603

340,701

1,461,019

1,801,720

Including general government

157,574

1,024,934

1,182,508

217,119

1,096,043

1,313,162

Including credit institutions

11,628

144,321

155,949

35,606

163,270

198,876

Including classified in stage 1

222,523

1,370,080

1,592,603

340,701

1,461,019

1,801,720

Bank, EUR thousands

31/12/2022

31/12/2021

At fair value

through other

comprehensive

income

amortised

cost

Total

At fair value

through other

comprehensive

income

amortised

cost

Total

Investment grade:

AAA/Aaa

27,141

110,767

137,908

32,727

84,967

117,694

AA/Aa

17,929

239,181

257,110

14,703

256,295

270,998

133,820

951,810

1,085,630

184,238

1,011,665

1,195,903

BBB/Baa

1,331

23,770

25,101

1,498

16,668

18,166

Lower ratings or unrated

44,552

49,547

Total debt securities

180,221

1,370,080

1,550,301

233,166

1,419,142

1,652,308

Including general government

138,275

1,024,934

1,163,209

185,496

1,083,706

1,269,202

Including credit institutions

4,470

144,321

148,791

5,219

151,193

156,412

Including classified in stage 1

180,221

1,370,080

1,550,301

233,166

1,419,142

1,652,308

Unrated debt securities or debt securities with lower ratings than BBB are mainly with corporates and are acquired or in some cases

structured by the Bank as an alternative to ordinary lending transactions. Among considerations for originating such lending products

is longer-term indirect benefits from development in local corporate debt markets and higher potential liquidity for lending products

structured as debt securities.

Debt securities by country of issuer

Group, EUR thousands

31/12/2022

31/12/2021

Government

bonds

Other

securities

Total

Government

bonds

Other

securities

Total

Lithuania

561,405

48,557

609,962

590,023

45,847

635,870

Latvia

409,697

2,376

412,073

478,272

3,500

481,772

Germany

89,213

12,710

72,922

85,632

Estonia

76,459

27,023

103,482

75,608

21,374

96,982

Poland

66,179

5,666

71,845

70,246

6,060

76,306

Sweden

10,012

32,362

42,374

3,083

40,842

43,925

United States

9,983

26,591

36,574

12,718

34,527

47,245

Canada

32,817

41,933

Finland

28,657

5,000

30,910

35,910

Netherlands

10,432

15,241

25,673

10,651

33,504

44,155

Multilateral development banks

35,753

49,532

Other countries

38,341

65,839

104,180

54,851

107,607

162,458

Total debt securities

1,182,508

410,095

1,592,603

1,313,162

488,558

1,801,720

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 46

Bank, EUR thousands

31/12/2022

31/12/2021

Government

bonds

Other

securities

Total

Government

bonds

Other

securities

Total

Lithuania

556,007

47,362

603,369

582,026

44,111

626,137

Latvia

403,125

1,310

404,435

468,861

2,185

471,046

Germany

89,213

10,000

59,468

69,468

Estonia

76,459

24,822

101,281

75,608

19,230

94,838

Poland

65,417

3,059

68,476

66,246

3,075

69,321

Sweden

10,012

32,362

42,374

39,516

Finland

28,657

5,000

30,910

35,910

Netherlands

10,432

15,241

25,673

10,651

33,504

44,155

Canada

32,817

41,933

United States

9,983

20,555

30,538

12,718

34,527

47,245

Multilateral development banks

30,892

49,532

Other countries

31,773

60,803

92,576

38,092

25,115

63,207

Total debt securities

1,163,208

387,093

1,550,301

1,269,202

383,106

1,652,308

No payments on the debt securities are past due. Total exposure to any single country within “Other countries” group as of period end

is smaller than 10% of the regulatory capital.

NOTE 16. LOANS TO PUBLIC

Loans by customer profile, industry profile and product type

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Financial and non-financial corporations

Real estate purchase and management

415,941

261,626

400,290

248,158

Transport and communications

260,005

219,457

40,320

33,327

Manufacturing

219,559

232,824

108,169

121,038

Trade

200,854

191,534

83,825

78,804

Agriculture and forestry

174,752

148,497

79,402

73,439

Construction

122,621

136,358

39,957

58,533

Electricity, gas and water supply

66,227

78,990

53,011

49,744

Hotels, restaurants

40,259

45,003

34,487

39,334

Financial intermediation

36,892

26,266

1,097,429

990,811

Other industries

155,613

178,615

19,934

35,068

Total financial and non-financial corporations

1,692,723

1,519,170

1,956,824

1,728,256

Households

Mortgage loans

833,607

786,435

830,916

782,995

Finance leases

350,499

307,597

Credit for consumption

92,039

73,800

87,953

71,544

Card lending

57,852

55,794

57,852

55,794

Other lending

18,428

19,263

17,415

18,983

Total households

1,352,425

1,242,889

994,136

929,316

General government

27,839

21,065

17,265

16,742

Total gross loans to public

3,072,987

2,783,124

2,968,225

2,674,314

Impairment allowance and provisions

(106,509)

(81,615)

(88,124)

(64,601)

Total net loans to public

2,966,478

2,701,509

2,880,101

2,609,713

Loans to public by customer profile and impairment stage

Group, 31/12/2022, EUR thousands

Gross amount

Expected

credit

loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

and POCI

Financial and non-financial corporations, government

1,633,916

261,636

60,498

(58,639)

1,897,411

Households

1,402,064

49,080

22,890

(52,690)

1,421,344

Total loans to public

3,035,980

310,716

83,388

(111,329)

3,318,755

Group, 31/12/2021, EUR thousands

Gross amount

Expected

credit

loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

and POCI

Financial and non-financial corporations, government

1,560,620

197,940

66,904

(46,667)

1,778,797

Households

1,297,068

52,930

24,524

(38,775)

1,335,747

Total loans to public

2,857,688

250,870

91,428

(85,442)

3,114,544

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 47

Bank, 31/12/2022, EUR thousands

Gross amount

Expected

credit

loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

and POCI

Financial and non-financial corporations, government

2,029,462

172,223

40,950

(44,515)

2,198,120

Households

1,061,451

25,683

21,603

(48,347)

1,060,390

Total loans to public

3,090,913

197,906

62,553

(92,862)

3,258,510

Bank, 31/12/2021, EUR thousands

Gross amount

Expected

credit

loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

and POCI

Financial and non-financial corporations, government

1,915,492

125,864

40,350

(32,735)

2,048,971

Households

997,258

37,315

22,963

(35,640)

1,021,896

Total loans to public

2,912,750

163,179

63,313

(68,375)

3,070,867

Loans by overdue days and impairment stage

Group, EUR thousands

31/12/2022

31/12/2021

Gross amount

Expected

credit loss

allowance

Net

carrying

amount

Gross amount

Expected

credit loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

and

POCI

Stage 1

Stage 2

Stage 3

and

POCI

Loans to public

Not past due

2,666,915

273,165

36,687

(66,940)

2,909,827

2,412,494

216,166

44,911

(44,319)

2,629,252

Past due <=30

days

27,005

9,856

4,679

(7,641)

33,899

38,085

10,287

993

(5,983)

43,382

Past due >30 and

≤90 days

13,376

2,996

(3,118)

13,254

15,100

7,635

(2,587)

20,148

Past due >90

days

38,308

(28,810)

9,498

37,453

(28,726)

8,727

Total loans to

public

2,693,920

296,397

82,670

(106,509)

2,966,478

2,450,579

241,553

90,992

(81,615)

2,701,509

Guarantees and

letters of credit

50,130

277

(452)

49,955

29,002

100

161

(222)

29,041

Financial

commitments

291,930

14,319

441

(4,368)

302,322

378,107

9,217

275

(3,605)

383,994

Total credit

exposure to

public

3,035,980

310,716

83,388

(111,329)

3,318,755

2,857,688

250,870

91,428

(85,442)

3,114,544

As of 31 December 2022, the gross amount of Group’s POCI loans to public is EUR 16.3 million (2021: EUR 26.1 million). The

recognised expected credit loss allowance on POCI loans to public is EUR 0.7 million (2021: EUR 0.2 million). Off-balance sheet

credit exposure comprises various committed financing facilities to the borrowers. For details refer to Note 28 (Off-balance Sheet

Items).

Bank, EUR thousands

31/12/2022

31/12/2021

Gross amount

Expected

credit loss

allowance

Net

carrying

amount

Gross amount

Expected

credit loss

allowance

Net

carrying

amount

Stage 1

Stage 2

Stage 3

Stage 1

Stage 2

Stage 3

Loans to public

Not past due

2,698,503

177,908

20,767

(51,593)

2,845,585

2,435,524

141,440

27,492

(29,803)

2,574,653

Past due <=30

days

18,069

8,771

4,562

(7,029)

24,373

22,051

9,185

826

(5,738)

26,324

Past due >30 and

≤90 days

2,945

1,241

(1,516)

2,670

3,237

1,375

(1,220)

3,392

Past due >90

days

35,459

(27,986)

7,473

33,184

(27,840)

5,344

Total loans to

public

2,716,572

189,624

62,029

(88,124)

2,880,101

2,457,575

153,862

62,877

(64,601)

2,609,713

Guarantees and

letters of credit

60,659

277

(452)

60,484

33,601

100

161

(222)

33,640

Financial

commitments

313,682

8,282

247

(4,286)

317,925

421,574

9,217

275

(3,552)

427,514

Total credit

exposure to

public

3,090,913

197,906

62,553

(92,862)

3,258,510

2,912,750

163,179

63,313

(68,375)

3,070,867

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 48

Stage 3 loans to public ratio

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Stage 3 loans to public ratio, gross

2.7%

3.3%

2.1%

2.4%

Stage 3 loans to public ratio, net

1.6%

2.0%

1.0%

1.2%

Stage 3 impairment ratio

44%

39%

54%

52%

The stage 3 loans to public ratio is calculated as stage 3 loans to public divided by total loans to public as of the end of the relevant

period. All loans overdue by more than 90 days are classified as stage 3. Non-overdue loans and loans overdue less than 90 days

which have been forborne or impairment loses have been identified based on individual assessment or financial condition of the

borrower has deteriorated significantly due to other factors are classified as stage 3. Part of the loans classified as stage 3 do not

have any current default indicators but are put under monitoring period for a specific time before being reclassified out of stage 3.

Loans under recovery are also classified as stage 3.

The stage 3 impairment ratio is calculated as impairment allowance for stage 3 exposures divided by gross loans to public classified

as stage 3. Impairment allowance is the amount of expected credit loss expensed in the income statement as credit loss and is derived

from historic credit loss rates and future credit loss expectations, and where relevant considering fair value of the loan collateral and

expected proceeds from other loan recovery measures.

NOTE 17. LEASES

Finance leases (a part of loans to public) by type of assets financed

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Transport vehicles

821,119

760,722

Manufacturing equipment

233,601

215,587

Industrial, office and other equipment

23,584

23,434

Total present value of finance lease payments,

excluding impairment

1,078,304

999,743

Impairment allowance

(17,732)

(16,747)

Net present value of finance lease payments

1,060,572

982,996

Reconciliation of the gross investment in the finance leases and the present value of minimum lease payments receivable

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Gross investment in finance leases receivable:

within one year

361,508

314,036

in year two

297,734

268,991

in year three

224,184

221,304

in year four

168,774

147,375

In year five

114,084

97,397

later than in five years

23,509

15,041

Total gross investment in finance leases

1,189,793

1,064,144

Unearned finance income receivable:

within one year

(46,671)

(27,366)

in year two

(31,205)

(18,228)

in year three

(19,401)

(11,011)

in year four

(10,008)

(5,609)

In year five

(3,414)

(1,767)

later than in five years

(790)

(420)

Total

(111,489)

(64,401)

Present value of minimum lease payments receivable:

within one year

314,837

286,670

in year two

266,529

250,763

in year three

204,783

210,293

in year four

158,766

141,766

In year five

110,670

95,630

later than in five years

22,719

14,621

Total

1,078,304

999,743

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 49

NOTE 18. EQUITY AND OTHER FINANCIAL INSTRUMENTS

Shares and other non-fixed income securities by issuers profile and classification

Group, EUR thousands

31/12/2022

31/12/2021

Mutual

investment

funds

Foreign

equities

Latvian

equities

Total

Mutual

investment

funds

Foreign

equities

Latvian

equities

Total

Non-trading financial assets

at fair value through profit

or loss

28,473

929

29,402

42,032

1,076

43,108

Financial assets at fair value

through other

comprehensive income

100

124

203

Total non-fixed income

securities, net

28,473

1,008

29,502

42,032

1,155

124

43,311

Including unit-linked

insurance plan assets

19,814

25,476

Most exposures in mutual investment funds which are classified as financial assets designated at fair value through profit or loss are

related to the life insurance business, most of these with unit-linked insurance plan assets. According to unit-linked investment contract

terms, the risk associated with the investments made by the insurance underwriter is fully attributable to the counterparty entering the

insurance agreement and not the underwriter. All investments in mutual investment funds are mandatorily classified as financial assets

at fair value through profit or loss.

As of 31 December 2022, the Bank and the Group has investments in mutual investment funds with carrying amounts of EUR 1.1

million (2021: EUR 7.4 million) and EUR 14.8 million (2021: EUR 25.8 million) which are managed by IPAS CBL Asset Management.

Further, EUR 11.2 million (2021: EUR 15.2 million) of these Group’s investments relate to unit-linked contracts, where the risk

associated with the investments made is fully attributable to the counterparty entering the insurance agreement and not the

underwriter. These exposures have been acquired only with investment intentions. The Bank has no exposure to investments related

to unit-linked contracts.

Bank, EUR thousands

31/12/2022

31/12/2021

Mutual

investment

funds

Foreign

equities

Latvian

equities

Total

Mutual

investment

funds

Foreign

equities

Latvian

equities

Total

Non-trading financial assets

at fair value through profit

or loss

1,101

929

2,030

7,400

1,076

8,476

Financial assets at fair value

through other

comprehensive income

100

124

203

Total non-fixed income

securities, net

1,101

1,008

2,130

7,400

1,155

124

8,679

NOTE 19. INVESTMENTS IN RELATED ENTITIES

Changes in investments in related entities of the Bank

EUR thousands

2022

2021

Balance at the beginning of the period, net

77,087

46,756

Investments in subsidiaries and acquisitions of

29,203

Investments in associates accounted for using the

equity method

(89)

Liquidation of subsidiary

(15,711)

(8)

Change in impairment allowance

288

1,131

Transfer to discontinued operations held for sale

(13,805)

Balance at the end of the period, net

47,770

77,087

Including associates accounted for using the equity

method

190

279

Including gross investment in subsidiaries

60,598

99,731

Changes in investments in subsidiaries

SIA Citadeles moduļi was liquidated on 30 November 2022 as the entity had no ongoing operations. Previously the major asset of the

entity was the Group’s Latvian headquarters building which was sold in 2020. As a result of liquidation, a cash proceeds of EUR 15.7

million were recognised. The proceeds from investment were equal to carrying value of the investment, thus no incremental liquidation

gain or loss was recognised.

Investment of EUR 13.8 million in Kaleido Privatbank AG was transferred to discontinued operations held for sale as the investment

is expected to be recovered principally through a sale transaction rather than through continuing operations.

Acquisition of UniCredit leasing operations in the Baltics in 2021

In 2019 AS Citadele banka entered into a binding agreement with UniCredit S.p.A. to acquire UniCredit’s Baltic leasing operations

through the acquisition of 100% of the shares in SIA UniCredit Leasing. Citadele obtained full control from the beginning of January

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 50

2021. After completion of the acquisition transaction in 2021, the acquired entity was renamed to SIA Citadele Leasing. The acquisition

includes Estonian and Lithuanian branches of the leasing entity and a subsidiary SIA CL Insurance Broker (former legal name SIA

UniCredit Insurance Broker). After the acquisition, Citadele refinanced existing borrowings of the acquired entity and committed

lending of up to EUR 880 million in total.

The acquired leasing subsidiary is one of the leaders in the Baltics, with more than 20 years of experience in the area of leasing and

a demonstrated ability to deliver sustainable business growth. Following the acquisition Citadele’s aggregate leasing portfolio exceeds

EUR 1 billion, creating a stronger Baltic Leasing offering allowing for economies of scale, synergies and shareholder value.

Valuation of investments in subsidiaries

In the reporting period valuation of SIA Citadele Factoring, SIA Citadeles moduļi and SIA Hortus Residential was reassessed. In total

EUR 0.3 million net release of impairment in the investments in these subsidiaries was recognised as a result of an improved

expectations of future free cash flows distributable to shareholders of SIA Citadele Factoring and an improved profitability of SIA

Hortus Residential while for SIA Citadeles moduļi reassessment resulted in small in decrease in valuation.

Carrying value of the investment in SIA Citadele Factoring is derived from present value of expected free equity distributable to the

shareholders, after required equity allocation for capital adequacy compliance. The target capital adequacy ratio is set at 12% and

includes allocated charges for all banking risks inherent in the business model of the leasing plus full set of regulatory buffers as

applicable for the Group consolidated and on top of that a managements buffer. Other key inputs of the model are 12.5% (2021:

12.0%) discount rate and future profitability of the operations of the entity. Sensitivity scenarios: if discount rate was +/-100 basis

points than the carrying value would change by EUR -0.2/+0.2 million (2021: EUR -0.8/+0.9 million), if net result was +/-10% than the

carrying value would change by EUR +/-0.4 million (2021: EUR +/-1.3 million).

Carrying value of SIA Hortus Residential is estimated by adjusting its net equity by present value of expected future gains and losses

on realisation of existing repossessed properties portfolio. If all expected sales prices were to change by +/-10% the carrying value

would change by EUR +/-0.1 million (2021: EUR +/-0.2 million).

Consolidation Group subsidiaries and associated entities for accounting purposes

Company

Registration

number

Registration address

and country

Company

type*

Basis for

inclusion in

the Group**

The

Group’s

(%)

% of total

voting

rights

Carrying value

EUR thousands

31/12/2022

31/12/2021

AS Citadele banka

40103303559

Latvia, Riga, Republikas

laukums 2A

BNK

SIA Citadele Leasing

40003423085

Latvia, Riga, Republikas

laukums 2A

LIZ

100

29,203

SIA Citadeles moduļi

(Liquidated)

40003397543

Latvia, Riga, Republikas

laukums 2A

PLS

100

15,752

Kaleido Privatbank AG

(Discontinued operations held

for sale)

130.0.007.738-0

Switzerland, Bellerivestrasse

17, 8008, Zürich

BNK

100

13,805

SIA Citadele Factoring

50003760921

Latvia, Riga, Republikas

laukums 2A

LIZ

100

8,247

8,043

IPAS CBL Asset Management

40003577500

Latvia, Riga, Republikas

laukums 2A

IPS

100

5,906

UAB Citadele Factoring

126233315

Lithuania, Upės g. 21, Vilnius,

LT-0812

LIZ

100

2,149

SIA Hortus Residential

40103460622

Latvia, Riga, Republikas

laukums 2A

PLS

100

984

859

AS CBL Atklātais Pensiju

Fonds

40003397312

Latvia, Riga, Republikas

laukums 2A

PFO

100

646

OU Citadele Factoring

10925733

Estonia, Tallinn 10152, Narva

mnt. 63/1

LIZ

100

445

SIA Mobilly (Investments in

associates accounted for

using the equity method)

40003654405

Latvia, Dzirnavu iela 91 k-3 -

20, Rīga, LV-1011

ENI

12.5

190

279

SIA CL Insurance Broker

40003983430

Latvia, Riga, Republikas

laukums 2A

PLS

MMS

100

AAS CBL Life

40003786859

Latvia, Riga, Republikas

laukums 2A

APS

MMS

100

Total net investments in subsidiaries and associated entities

47,770

77,087

Consolidation Group subsidiaries in liquidation process in foreign jurisdictions

Company

Registration

number

Registration address

and country

Company

type*

Basis for

inclusion in

the Group**

The

Group’s

(%)

% of total

voting

rights

Carrying value

EUR thousands

31/12/2022

31/12/2021

OOO Mizush Asset

Management Ukraina (in

liquidation)

32984601

Ukraine

IBS

MMS

100

*BNK – bank, ENI – authorized electronic money institution, IBS – investment brokerage company, IPS – investment management company, PFO –

pension fund, CFI – other financial institution, LIZ – leasing company, PLS – company providing various support services, APS – insurance company.

** MS – subsidiary company, MMS – subsidiary of the subsidiary company, MT – parent company, MTM – parent of the parent company, CT – other

company.

OOO Mizush Asset Management Ukraina is in liquidation as this Group subsidiary had no ongoing business operations. For OOO

Mizush Asset Management Ukraina a liquidator (AA PricewaterhouseCoopers Legal) has been appointed. The final tax audit has

been completed. The final report has been submitted as per statutory requirement and a formal liquidation decision from the statutory

register is being awaited. Due to long-drawn-out liquidation procedures in Ukraine, the Group has decided and is in the final stage of

agreeing a disposal of OOO Mizush Asset Management Ukraina to a law office independent of Citadele which would become the new

owner of the company and would finalise the liquidation on its own.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 51

NOTE 20. TANGIBLE AND INTANGIBLE ASSETS

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Transport vehicles

5,143

7,653

Right-of-use assets

5,794

6,774

6,081

6,522

IT and other equipment

3,470

4,409

2,842

3,308

Leasehold improvements

1,147

1,318

1,147

1,318

Land and buildings

168

290

168

290

Prepayments for tangible assets

Total tangible assets

15,730

20,444

10,321

11,496

Software

7,332

7,088

5,371

4,995

Other intangible assets

130

163

107

Prepayments for intangible assets

700

1,311

664

981

Total intangible assets

8,162

8,562

6,069

6,083

Total tangible and intangible assets

23,892

29,006

16,390

17,579

Changes in tangible and intangible assets of the Group

Leasehold

improve-

ments

Land and

buildings

Transport

vehicles

Right-of-

use assets

IT and

other

equipment

Software

Other

intangible

assets

Total

excluding

prepayments

Historical cost

As at 31 December 2020

1,919

1,666

543

7,360

15,148

27,276

304

54,216

Additions

634

11,371

5,703

3,828

6,146

124

27,819

Disposals and write-offs

(275)

(650)

(1,592)

(6,289)

(2,501)

(128)

(71)

(11,506)

As at 31 December 2021

2,278

1,029

10,322

6,774

16,475

33,294

357

70,529

Additions

276

199

3,376

921

4,903

100

9,775

Disposals and write-offs

(47)

(364)

(2,287)

(3,386)

(2,047)

(302)

(163)

(8,596)

Discontinued operations

(970)

(339)

(994)

(2,303)

As at 31 December 2022

2,507

665

8,234

5,794

15,010

36,901

294

69,405

Accumulated depreciation

As at 31 December 2020

725

460

399

11,769

22,234

177

35,764

Charge for the year

426

1,634

3,334

1,569

3,284

10,351

Incl. assets under

operating lease (Note 8)

1,578

Acquisition

1,209

1,109

763

3,127

Disposals

(223)

(92)

(573)

(3,334)

(2,392)

(75)

(72)

(6,761)

As at 31 December 2021

960

397

2,669

12,055

26,206

194

42,481

Charge for the year

443

1,372

2,815

1,565

3,905

10,196

Incl. assets under

operating lease (Note 8)

1,344

123

1,467

Disposals

(43)

(124)

(950)

(2,815)

(2,015)

(302)

(109)

(6,358)

Discontinued operations

(65)

(240)

(305)

As at 31 December 2022

1,360

290

3,091

11,540

29,569

164

46,014

Impairment allowance

As at 31 December 2020

(342)

(11)

(353)

Net reversal and write-offs

As at 31 December 2021

(342)

(11)

(353)

Net reversal and write-offs

135

146

As at 31 December 2022

(207)

Net carrying amount

As at 31 December 2020

1,194

864

144

7,360

3,368

5,042

127

18,099

As at 31 December 2021

1,318

290

7,653

6,774

4,409

7,088

163

27,695

As at 31 December 2022

1,147

168

5,143

5,794

3,470

7,332

130

23,184

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 52

Changes in tangible and intangible assets of the Bank

Leasehold

improve-

ments

Land and

buildings

Transport

vehicles

Right-of-

use assets

IT and

other

equipment

Software

Other

intangible

assets

Total

excluding

prepayments

Historical cost

As at 31 December 2020

1,791

1,428

367

8,881

14,866

26,464

240

54,037

Additions

539

1,368

1,293

2,632

5,845

Disposals and write-offs

(52)

(412)

(123)

(3,727)

(1,919)

(52)

(6,285)

As at 31 December 2021

2,278

1,029

244

6,522

14,240

29,044

240

53,597

Additions

276

2,786

866

3,627

7,605

Disposals and write-offs

(47)

(364)

(14)

(3,227)

(1,949)

(108)

(5,709)

As at 31 December 2022

2,507

665

280

6,081

13,157

32,671

132

55,493

Accumulated depreciation

As at 31 December 2020

597

445

269

11,537

21,541

113

34,502

Charge for the year

412

3,328

1,288

2,508

7,616

Disposals

(49)

(76)

(115)

(3,328)

(1,893)

(5,461)

As at 31 December 2021

960

397

186

10,932

24,049

133

36,657

Charge for the year

443

3,229

1,322

3,251

8,309

Disposals

(43)

(124)

(9)

(3,229)

(1,939)

(54)

(5,398)

As at 31 December 2022

1,360

290

205

10,315

27,300

39,568

Impairment allowance

As at 31 December 2020

(342)

Net reversal and write-offs

As at 31 December 2021

(342)

Net reversal and write-offs

135

As at 31 December 2022

(207)

Net carrying amount

As at 31 December 2020

1,194

641

8,881

3,329

4,923

127

19,193

As at 31 December 2021

1,318

290

6,522

3,308

4,995

107

16,598

As at 31 December 2022

1,147

168

6,081

2,842

5,371

15,718

Right-of-use assets of the Group and the Bank predominantly constitute one class of assets – lease contracts for premises where

branches, headquarters and ATMs are located.

NOTE 21. DISCONTINUED OPERATIONS AND NON-CURRENT ASSETS HELD FOR

SALE

In January 2022, AS Citadele banka entered into a binding agreement with Trusted Novus Bank Limited regarding the sale of its Swiss

subsidiary – Kaleido Privatbank AG. Trusted Novus Bank Limited will acquire 100% of Kaleido Privatbank AG. The closing is subject

to regulatory approvals. As the conditions indicate that the investment will be recovered principally through a sale transaction rather

than through continuing operations, Kaleido Privatbank AG is presented as discontinued operations as of period end. The

Management has a strong commitment to sell Kaleido Privatbank AG. The sale of Kaleido Privatbank AG is a further step focusing

on Citadele’s core activities in the Baltics and is in line with Citadele’s long-term ambition to become the leading financial services

provider in the Baltics.

Result from discontinued operations and non-current assets held for sale

EUR thousands

2022

2021

2022

2021

Group

Bank

Net interest income

1,828

1,104

Net fee and commission income

2,896

2,319

Other operating income and expense

(334)

549

Staff costs, other operating expenses, depreciation

and amortisation

(8,540)

(10,897)

Net credit losses and other impairment losses

(338)

(195)

Income tax

(3)

(32)

Net result from discontinued operations

(4,491)

(7,152)

Result from non-current assets held for sale

286

(213)

Net result from non-current assets held for sale

and discontinued operations

(4,205)

(7,365)

286

(213)

Other comprehensive income / (loss)

(207)

(21)

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 53

Assets and liabilities constituting discontinued operations and non-current assets held for sale

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Assets

Cash, cash balances at central banks

6,671

Loans to credit institutions

23,671

Debt securities

88,989

Including:

AAA/Aaa rated

32,768

AA/Aa rated

30,619

A rated

17,967

BBB/Baa rated

7,635

General government

20,928

Credit institutions

29,063

Classified in stage 1

88,989

Loans to public (all classified in stage 1)

44,540

Other assets

2,136

Discontinued operations

166,007

Investment in Kaleido Privatbank AG (subsidiary)

13,805

Other non-current assets held for sale

946

Discontinued operations and non-current assets

held for sale

166,028

946

13,827

946

Liabilities

Deposits from credit institutions and central banks

170

Deposits and borrowings from customers

156,474

Other liabilities

2,355

Discontinued operations

158,999

* Assets and liabilities (as opposed to income statement items) of the discontinued operations are not re-presented for the

comparative period as per requirements of the relevant financial reporting standards.

Cash flows from discontinued operations of the Group

EUR thousands

2022

2021

Cash flows from operating activities

(12,509)

(51,778)

Cash flows from investing activities

14,082

56,018

Cash flows from financing activities

(227)

691

Cash flows for the period

1,346

4,931

Cash and cash equivalents at the beginning of the

period

28,826

23,895

Cash and cash equivalents at the end of the period

30,172

28,826

NOTE 22. OTHER ASSETS

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Money in transit

20,190

19,474

20,182

19,424

Repossessed assets

1,019

2,118

Deferred expenses and accrued income (maturing in

less than 12 months from the period end)

10,196

10,629

7,153

6,062

Other assets

9,893

8,438

4,911

4,893

Total gross other assets

41,298

40,659

32,246

30,379

Impairment allowance

(1,768)

(1,542)

(1,566)

(1,467)

Total net other assets

39,530

39,117

30,680

28,912

As at 31 December 2022 and 2021 most of the impairment allowance for other assets relate to fully impaired overdue debt collection

expenditure compensation receivable; net carrying amount of these assets is nil. As at 31 December 2022, the Group had no

unimpaired delayed other assets (2020: EUR nil).

From time to time the Group repossesses from its customers certain assets serving as collateral, when the customers cannot otherwise

meet their payment obligations and other loan work-out measures have been unsuccessful. Collateral obtained is recognised within

other assets and are held for sale in near future. Real estate constitutes EUR 0.9 million of the repossessed assets as of 31 December

2022 (2021: EUR 2.1 million). Total net carrying value of the collateral obtained during the reporting period and still held at the end of

the reporting period is EUR 0.0 million (2021: EUR 0.2 million). Other repossessed collaterals held at the end of the reporting period

are from earlier periods.

Repossessed assets where the management has committed to an active plan that is expected to result in a complete sale within one

year from the date of classification are classified as non-current assets held for sale.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 54

NOTE 23. DEPOSITS FROM CREDIT INSTITUTIONS AND CENTRAL BANKS

Bank deposits and borrowings by type

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

ECB's targeted longer-term refinancing operations

463,796

475,810

463,796

475,810

Deposits from Citadele Group banks

3,663

20,393

Other credit institution deposits and collateral

accounts

5,934

3,419

5,934

3,419

Other central bank deposits and accounts

Total deposits from credit institutions and

central banks

469,736

479,235

473,399

499,628

On 24 June 2020, Citadele started to participate in the ECB's targeted longer-term refinancing operations (TLTRO-III) borrowing EUR

440 million. The maturity date of the facility is 28 June 2023 with an early repayment option starting on 29 September 2021. In June

2021 TLTRO-III borrowing was increased by EUR 40 million and in 2022 EUR 11 million was repaid. Subsequent to the period end,

additional amounts were repaid.

For Citadele until June 2022 a combined interest rate on the TLTRO-III borrowing was -1.0% as in the relevant reference period ECB’s

specified lending criteria was achieved. Based on an internal assessment, part of the inflow of economic benefits from TLTRO-III

borrowing with negative effective interest rate, which may be justified as market rate, is recognised within interest income. The

remainder is a benefit of the below-market rate of interest and is recognised within other income as a support or compensation for the

fulfilment of the required obligations and for supporting customer needs.

The methodology for calculation of the applicable interest rate and the linked reference rate was changed by ECB several times in

2022 and may be changed by ECB in the future. This instrument has been regarded as variable market rate instrument. As ECB

revised applicable reference rate the effective interest rate of the borrowing was also revised .

NOTE 24. DEPOSITS AND BORROWINGS FROM CUSTOMERS

Deposits and borrowings by profile of the customer

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Households

2,064,956

2,048,986

2,064,956

2,001,336

Non-financial corporations

1,662,036

1,493,271

1,636,950

1,386,755

Financial corporations

166,882

214,207

185,027

220,034

General government

67,416

44,682

67,416

44,682

Other

18,971

12,717

18,971

12,717

Total deposits from customers

3,980,261

3,813,863

3,973,320

3,665,524

Deposits and borrowings from customers by contractual maturity

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Demand deposits

3,581,365

3,464,832

3,597,467

3,366,093

Term deposits due within:

less than 1 month

127,244

61,678

127,604

58,141

more than 1 month and less than 3 months

51,105

60,500

51,071

51,867

more than 3 months and less than 6 months

48,257

37,064

46,341

27,036

more than 6 months and less than 12 months

127,886

128,875

125,986

122,432

more than 1 year and less than 5 years

36,819

51,452

22,650

36,521

more than 5 years

7,585

9,462

2,201

3,434

Total term deposits

398,896

349,031

375,853

299,431

Total deposits from customers

3,980,261

3,813,863

3,973,320

3,665,524

Deposits and borrowings from customers by categories

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

At amortised cost

3,955,021

3,774,118

3,973,320

3,665,524

At fair value through profit or loss

25,240

39,745

Total deposits from customers

3,980,261

3,813,863

3,973,320

3,665,524

Including unit-linked insurance plan liabilities

20,890

25,772

All deposits from customers of the Group which are classified at fair value through profit or loss relate to the Group’s life insurance

business. It is the deposit component of the insurance plans. All unit-linked insurance plan liabilities are covered by financial assets

designated at fair value through profit or loss. According to unit-linked investment contract terms, the risk associated with the

investments made by the insurance underwriter is fully attributable to the counterparty entering the insurance agreement and not the

underwriter.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 55

NOTE 25. DEBT SECURITIES ISSUED

Publicly listed debt securities

ISIN code of the

issued bond

Eligibility

Currency

Interest

rate

Initial

maturity

date

Principal,

EUR

thousands

Amortised cost,

EUR thousands

31/12/2022

31/12/2021

XS2393742122

MREL eligible

EUR

1.625%

22/11/2026

200,000

199,037

198,714

LV0000880102

Subordinated

EUR

5.00%

13/12/2031

40,000

40,104

LV0000880011

Subordinated

EUR

5.50%

24/11/2027

20,000

20,084

20,077

259,225

258,895

Unsecured subordinated securities qualify for inclusion in the Bank’s and the Group’s Tier 2 capital. For details on capital adequacy

refer to Capital management section of the Note 35 (Risk Management).

Key features of the issued subordinated bonds and MREL eligible senior unsecured bonds

EUR 200 million senior unsecured preferred bonds (XS2393742122) have a five years maturity, with issuer’s optional redemption

date after four years. The purpose of the issuance is to meet Minimum Requirement for own funds and Eligible Liabilities (MREL).

The senior unsecured preferred bonds were offered to institutional investors. The bonds are listed on Euronext Dublin and Nasdaq

Riga. As of the issuance date, the bonds were rated Baa3 by Moody’s.

EUR 40 million (LV0000880102) and EUR 20 million (LV0000880011) unsecured subordinated bonds were issued in the local Baltic

capital markets with ten years maturity and issuer’s optional redemption after five years. These subordinated bonds are included in

the Tier 2 capital of Citadele and contribute to stronger capital position of the Bank. The unsecured subordinated bonds were offered

to institutional and retail investors in Latvia, Lithuania and Estonia, as well as institutional investors located in the Member States of

the EEA.

Profile of the bondholders as of the last coupon payment date of the subordinated bonds

ISIN code of the

issued bond

Last coupon or

origination

date

Number of

bondholders

Legal and professional

investors

Private individuals

Number

EUR th.

Number

EUR th.

LV0000880102

December 2022

258

110

26,990

67%

148

13,010

33%

LV0000880011

November 2022

16,970

85%

3,030

15%

NOTE 26. OTHER LIABILITIES

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Insurance reserves:

Annuity pension products

45,656

41,492

Unearned premiums – life insurance

141

118

Unearned premiums – other insurance

IBNR, RBNS and other

Payables to lease suppliers

12,945

19,155

Employee related accruals

9,730

11,851

8,456

8,273

Other accrued expenses

8,041

8,715

6,143

5,784

Lease liabilities

6,133

7,614

5,914

6,529

Regulatory fee and similar accruals

3,396

1,876

3,396

1,876

Other liabilities

11,534

9,359

4,274

3,014

Total other liabilities

97,691

100,247

28,183

25,476

Insurance liabilities mostly comprise estimated present value of future cash outflows from defined benefit annuity pension products

sold to customers by AAS CBL Life. The annuity products are subject to terms, conditions and limitations. Estimated cash outflows

are conditional to life longevity assumptions and defined benefit payment structure. Most of the defined payments are due within five

years period.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 56

NOTE 27. SHARE CAPITAL

The Bank has one class ordinary shares. As of the period end from the total Bank’s registered capital EUR 157,351,784 (2021: EUR

156,888,384) was issued and EUR 157,257,658 was fully paid and EUR 2,874,655 (2021: EUR 2,456,084) was registered as

conditional capital. As of period end the Bank owns EUR 94,126 (2021: EUR 0) of its own shares. The conditional capital represents

the maximum number of shares that may be allocated for awarding to employees as share options. No dividends were proposed and

paid during the reporting period. Each ordinary share carries one vote, a share in profits and is eligible for dividends.

Shareholders of the Bank

31/12/2022

31/12/2021

Paid-in share

capital

(EUR)

Total shares

with voting

rights

Paid-in share

capital

(EUR)

Total shares

with voting

rights

European Bank for Reconstruction and Development

39,138,948

RA Citadele Holdings LLC

35,082,302

42,772,216

Delan S.à.r.l.

15,597,160

EMS LB LLC

22,043,916

15,577,301

Amolino Holdings Inc.

16,863,223

15,639,924

Shuco LLC

12,297,697

Members of the Management Board of the Bank and

parties related to them

574,274

302,732

Other shareholders

15,660,138

15,562,406

Total

157,257,658

156,888,384

RA Citadele Holdings LLC (United States) is a wholly owned subsidiary of Ripplewood Advisors LLC and is beneficially owned by

Mr Timothy Collins

Delan S.à.r.l. is beneficially owned by the Baupost Group LLC

EMS LB LLC is beneficially owned by Mr Edmond M. Safra

Amolino Holdings Inc. is beneficially owned by Mr James L. Balsillie

Shuco LLC is beneficially owned by Mr Stanley S. Shuman

In the reporting period 464 thousand share options (2021: 333 thousand share options), previously awarded to the employees of the

Bank, vested. All options were exercised on the vesting date, from these 353 thousand share options were exercised by the Members

of the Management Board of the Bank (2021: 303 thousand share options). In the reporting period 94 thousand shares were

repurchased for the total amount of EUR 238 thousand.

Earnings per share

Basic earnings per share are calculated by dividing the net profit that is attributable to the ordinary shareholders by the weighted

average number of the ordinary shares outstanding during the period. Diluted earnings per share are determined by adjusting the net

profit that is attributable to the ordinary shareholders and the weighted-average number of the ordinary shares outstanding for the

effects of all dilutive potential ordinary shares, which comprise share options granted to employees in the long-term incentive

programs. The part of the performance-based employee share options for which the services under the approved long-term incentive

programs have been received are included in the calculation of diluted earnings per share. The remaining part of the performance-

based employee share options, issuance of which is contingent upon satisfying specific conditions, in addition to the passage of time,

are treated as contingently issuable shares and are not included in the calculation of diluted earnings per share.

2022

2021

2022

2021

Group

Bank

Profit for the period, EUR thousands

46,305

55,045

42,183

29,643

Weighted average number of the ordinary shares

outstanding during the period in thousands

157,073

156,722

157,073

156,722

Basic earnings per share in EUR

0.29

0.35

0.27

0.19

Weighted average number of the ordinary shares

(basic) outstanding during the period in thousands

157,073

156,722

157,073

156,722

Effect of share options in issue in thousands

1,230

1,095

1,230

1,095

Weighted average number of the ordinary shares

(diluted) outstanding during the period in

thousands

158,303

157,817

158,303

157,817

Profit for the period, EUR thousands

46,305

55,045

42,183

29,643

Weighted average number of the ordinary shares

(diluted) outstanding during the period in thousands

158,303

157,817

158,303

157,817

Diluted earnings per share in EUR

0.29

0.35

0.27

0.19

Net losst from discontinued operations (Note 21)

(4,491)

(7,152)

Profit for the period from continuing operations, EUR

thousands

50,796

62,197

42,183

29,643

Basic earnings per share in EUR from continuing

operations

0.32

0.40

0.27

0.19

Diluted earnings per share in EUR from

continuing operations

0.32

0.39

0.27

0.1 9

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 57

NOTE 28. OFF-BALANCE SHEET ITEMS

Off-balance sheet items comprise contingent liabilities, financial commitments, notional amounts payable or receivable from

transactions with foreign exchange contracts and other derivative financial instruments.

Contingent liabilities and financial commitments outstanding

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Contingent liabilities:

Outstanding guarantees

45,509

17,333

56,038

21,932

Outstanding letters of credit

4,898

16,932

4,898

16,931

Total contingent liabilities

50,407

34,265

60,936

38,863

Provisions for credit risk

(452)

(229)

(452)

(229)

Net credit risk exposure for guarantees and letters

of credit

49,955

34,036

60,484

38,634

Financial commitments:

Card commitments

117,841

122,102

117,866

122,118

Unutilised credit lines and loans granted, not fully

drawn down

154,742

212,009

204,345

308,947

Factoring commitments

33,894

53,488

Other commitments

213

344

Total financial commitments

306,690

387,943

322,211

431,065

Provisions for financial commitments

(4,368)

(3,605)

(4,286)

(3,552)

Net credit risk exposure for financial commitments

302,322

384,338

317,925

427,513

Lending commitments are a time limited promise that a specified amount of loan or credit line will be made available to the specific

borrower on specific pre-agreed terms. For part of the committed lending promises clients have to perform certain obligations before

the balance committed becomes available to them. Some lending commitments and undrawn credit facilities may be cancelled

unconditionally by the Group at any time without notice, or in accordance with lending terms and conditions may effectively provide

for automatic cancellation due to deterioration in creditworthiness of a borrower.

Notional amounts and fair values of derivatives of the Group

Notional amount

Fair value

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Assets

Liabilities

Assets

Liabilities

Foreign exchange contracts:

Swaps

248,357

278,049

1,261

(7,550)

3,989

(614)

Forwards

5,707

12,842

(100)

314

(125)

Total foreign exchange contracts

254,064

290,891

1,285

(7,650)

4,303

(739)

Derivatives

254,064

290,891

1,285

(7,650)

4,303

(739)

Notional amounts and fair values of derivatives of the Bank

Notional amount

Fair value

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Assets

Liabilities

Assets

Liabilities

Foreign exchange contracts:

Swaps

248,357

278,049

1,261

(7,550)

3,989

(614)

Forwards

5,707

12,842

(100)

314

(125)

Total foreign exchange contracts

254,064

290,891

1,285

(7,650)

4,303

(739)

Derivatives

254,064

290,891

1,285

(7,650)

4,303

(739)

The Group’s banks use derivative foreign exchange instruments to manage their currency positions, which arise also due to derivative

foreign exchange contracts concluded with the banks’ clients. Before entering into derivative foreign currency agreement with a private

individual or a company, the Group’s entities assess the counterparty’s ability to meet the contractual provisions. As at 31 December

2022, 2% (2021: 2%) of the fair value of derivative assets on foreign exchange contracts is attributable to credit and finance institutions.

As at 31 December 2022, none (2021: nil) of the receivables arising out of derivative transactions were past due.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 58

NOTE 29. ASSETS UNDER MANAGEMENT

Fair value of assets managed on behalf of customers by investment type

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Fixed income securities:

Corporate bonds

150,604

193,845

Government bonds

56,242

71,233

Credit institution bonds

55,183

54,083

Loans

604

631

604

631

Other financial institution bonds

20,545

22,477

Total investments in fixed income securities

283,178

342,269

604

631

Other investments:

Investment funds

530,823

641,845

Deposits with credit institutions

4,984

1,005

Compensations for distribution on behalf of deposit

guarantee fund

31,716

12,049

31,716

12,049

89,029

116,175

Real estate

5,119

4,820

Other

49,034

31,777

Total other investments

710,705

807,671

31,716

12,049

Total assets under management

993,883

1,149,940

32,320

12,680

Customer profile on whose behalf the funds are managed

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Pension plans

706,976

814,908

Insurance companies, investment and pension funds

134,267

187,750

Other companies and government

41,280

19,397

32,320

12,680

Private individuals

111,360

127,885

Total liabilities under management

993,883

1,149,940

32,320

12,680

NOTE 30. FINANCIAL ASSETS PLEDGED OR ENCUMBERED

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Loans on demand to credit institutions

6,280

353

6,280

Debt securities

529,059

526,755

529,059

524,996

Loans to customers and other assets

541,923

7,558

237,551

7,558

Total financial assets pledged or encumbered

1,077,262

534,666

772,890

532,554

Total liabilities secured by pledged assets

463,796

475,810

463,796

475,810

Financial guarantees received

344,704

109,952

Most pledged debt securities are collateral placed with the Bank of Latvia to secure EUR 480 million financing in the ECB's targeted

longer-term refinancing operations (TLTRO-III). Standard TLTRO-III terms apply. For details on TLTRO-III financing received refer to

Note 23 (Deposits from Credit Institutions and Central Banks). Most loans to customers and other assets are encumbered as per

terms of a financial guarantee contract issued by the EIB Group, consisting of the European Investment Bank (EIB) and the European

Investment Fund (EIF), to Citadele. The guarantee contract secures probable Citadele’s future losses allocated to the relevant tranche

of the reference loan portfolio for a pre-agreed fee to the EIB Group. In accordance with the risk retention requirements of the

guarantee contract, Citadele must retain on an unhedged and unguaranteed basis an exposure to the reference loan portfolio over a

specific period. The guarantee contract provides capital relief for Citadele by mitigating specific credit risks and enables Citadele to

grant at least EUR 460 million in additional loans and leases to businesses in the Baltics over the next three years. Other pledged

amounts consist of placements to secure various Bank’s and Group’s transactions in the ordinary course of business.

NOTE 31. CASH AND CASH EQUIVALENTS

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Cash and cash balances with central banks

532,030

371,025

532,030

361,626

Loans on demand to credit institutions

25,382

36,743

18,985

13,710

Demand deposits from central banks and credit

institutions

(5,940)

(3,425)

(6,020)

(11,670)

Cash equivalents in discontinued operations

30,172

Total cash and cash equivalents

581,644

404,343

544,995

363,666

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 59

NOTE 32. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

Fair value is the price that would be received for an asset sold or paid to transfer a liability in an orderly transaction between market

participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group has access

at that date. The fair value of a liability reflects its non-performance risk.

For illiquid financial assets and liabilities, including loans and advances to customers, there are no active markets. Accordingly, fair

value for these has been estimated using appropriate valuation techniques. The methods used to determine the fair value of balance

sheet items are as follows:

Cash and balances at central banks

The fair value of cash and balances with central banks is their carrying amount as these balances may be withdrawn without notice.

Loans to credit institutions and deposits from credit institutions and central banks

The fair value of on-demand balances with credit institutions is their carrying amount as these balances may be withdrawn without

notice. The fair value of overnight placements is their carrying amount. The fair value of other amounts due from banks is calculated

by discounting expected cash flows using current market rates. The carrying value is a close representation of fair value due to short

maturity profiles and interest rate profile.

Loans to public

The fair value of loans and advances to customers is calculated by discounting expected future cash flows. The discount rate is the

sum of money market rate as of the end of the reporting period and credit margin, which is adjusted for current market conditions. If

all the Bank’s assumed discount rates would change by 10%, the fair value of the loan portfolio would change by EUR 22.1 million

(2021: EUR 21.1 million).

Debt securities

Debt securities classified as at fair value through profit or loss and at fair value through other comprehensive income are accounted

at unadjusted quoted prices in active markets which is their fair value. Debt securities classified at amortised cost are not accounted

at fair value; the disclosed fair value for these is their unadjusted quoted prices in active markets.

Equity instruments and other financial instruments at fair value

Investments in mutual investment funds (presented as other financial instruments at fair value) are valued using unadjusted quoted

prices in active markets.

Equity instruments include Visa Inc. preferred C shares which have been valued by reference to consideration, which is contingent

upon future events. The valuation is dependent on exchange rate, Visa Inc. stock price and preferred stocks’ conversion ratio as well

as liquidity discount. The instrument is categorised as Level 3. If the applied liquidity discount was decreased by 1000bp, the estimated

fair value would increase by EUR 0.2 million as of 31 December 2022 (2021: EUR 0.4 million).

Derivatives

Derivatives are valued using techniques based on observable market data.

Deposits and borrowings from customers

Deposits and borrowing from customers include part which is carried at amortised cost and part which is carried at fair value. The

entire portfolio of deposits and borrowing from customers which is carried at fair value is the deposit part of the life insurance contracts.

The fair value of deposits and borrowings from customers repayable on demand is their carrying amount. The fair value of other

deposits is calculated by discounting expected cash flows using average market interest rates close to or at the period-end. If all the

assumed discount rates would change by 10%, the fair value of the non-subordinated non-life insurance deposit portfolio would

change by EUR 0.14 million (2021: EUR 0.03 million).

The fair value of unit-linked investment contract liabilities is their carrying amount which equals fair value of unit-linked insurance plan

assets. The fair value of other life insurance deposits carried at fair value through profit or loss is calculated by discounting expected

cash flows using current effective deposit rates. If the assumed discount rates would change by +/-50bp, the fair value of the portfolio

would decrease by EUR +/-0.07 million (2021: EUR +/-0.07 million).

The fair value of unit-linked investment contract liabilities is their carrying amount which equals fair value of unit-linked insurance plan

assets. The fair value of other life insurance deposits carried at fair value through profit or loss is calculated by discounting expected

cash flows using current effective deposit rates.

Debt securities issued

The fair value of publicly listed unsecured subordinated bonds is estimated based on the quoted prices.

Fair value hierarchy

Quoted market prices (Level 1)

Financial instruments are valued using unadjusted quoted prices in active markets.

Valuation technique - observable market inputs (Level 2)

Financial instruments are valued using techniques based on observable market data. In some instances, valuations received from

independent third party are used or quotations from less active market.

Valuation technique - non-market observable inputs (Level 3)

Financial instruments are valued using techniques for which significant inputs are not based on observable market data.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 60

Fair values of financial assets and liabilities of the Group on 31 December 2022

Fair value hierarchy (where applicable)

Carrying

value

Total fair

value

Quoted

market

prices

Valuation

technique -

observable

inputs

Valuation

technique –

non-market

observable

inputs

Financial assets measured at fair value through other

comprehensive income:

Debt securities

222,523

108,713

113,810

Equity instruments

100

Non-trading financial assets mandatorily at fair value

through profit or loss:

Equity instruments

929

Other financial instruments

28,473

Other financial assets at fair value through profit or loss

Derivatives

1,285

Financial assets not measured at fair value:

Cash and balances at central banks

532,030

Loans to credit institutions

48,441

Debt securities

1,370,080

1,247,787

754,265

481,006

12,516

Loans to public

2,966,478

2,975,840

Total assets

5,170,339

5,057,408

891,451

596,101

2,989,385

Financial liabilities measured at fair value:

Derivatives

7,650

Deposits and borrowings from customers

25,240

20,890

4,350

Financial liabilities not measured at fair value:

Deposits from credit institutions and central banks

469,736

Deposits and borrowings from customers

3,955,021

3,956,055

Debt securities issued

259,225

238,277

Total liabilities

4,716,872

4,696,958

20,890

245,927

3,960,405

As of 31 December 2022, debt securities classified in fair value hierarchy as Level 2 (Valuation technique - observable market inputs)

have increased as compared to 31 December 2021. The main contributor for increase is widening bid-ask spreads for investment

grade Baltic debt securities which was observed at the year-end in 2022 which was benchmarked versus fixed bid-ask spread

threshold which is fixed in the Group’s fair value hierarchy methodology and is applied consistently year over year. As a result, debt

securities of the Group presented as Level 2 with a fair value of EUR 385.4 million as of period end over the year have been reclassified

from Level 1. Similarly, debt securities of the Group presented as Level 1 with a fair value of EUR 5.7 million of period end over the

year have been reclassified from Level 2. For the Bank EUR 372.6 million and EUR 5.0 million respectively. No other transfers among

fair value hierarchy levels have occurred in the reporting period.

Fair values of financial assets and liabilities of the Group on 31 December 2021

Fair value hierarchy (where applicable)

Carrying

value

Total fair

value

Quoted

market

prices

Valuation

technique -

observable

inputs

Valuation

technique –

non-market

observable

inputs

Financial assets measured at fair value through other

comprehensive income:

Debt securities

340,701

257,464

83,237

Equity instruments

203

Non-trading financial assets mandatorily at fair value

through profit or loss:

Equity instruments

1,076

Other financial instruments

42,032

Other financial assets at fair value through profit or loss

Derivatives

4,303

Financial assets not measured at fair value:

Cash and balances at central banks

371,025

Loans to credit institutions

58,742

Debt securities

1,461,019

1,463,194

1,304,631

139,075

19,488

Loans to public

2,701,509

2,712,632

Total assets

4,980,610

4,993,908

1,604,127

226,615

2,733,399

Financial liabilities measured at fair value:

Derivatives

739

Deposits and borrowings from customers

39,745

25,772

13,973

Financial liabilities not measured at fair value:

Deposits from credit institutions and central banks

479,235

Deposits and borrowings from customers

3,774,118

3,775,140

Debt securities issued

258,895

259,344

Total liabilities

4,552,732

4,554,203

25,772

260,083

3,789,113

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 61

Fair values of financial assets and liabilities of the Bank on 31 December 2022

Fair value hierarchy (where applicable)

Carrying

value

Total fair

value

Quoted

market

prices

Valuation

technique -

observable

inputs

Valuation

technique –

non-market

observable

inputs

Financial assets measured at fair value through other

comprehensive income:

Debt securities

180,221

84,190

96,031

Equity instruments

100

Non-trading financial assets mandatorily at fair value

through profit or loss:

Equity instruments

929

Other financial instruments

1,101

Other financial assets at fair value through profit or loss

Derivatives

1,285

Financial assets not measured at fair value:

Cash and balances at central banks

532,030

Loans to credit institutions

42,044

Debt securities

1,370,080

1,247,787

754,265

481,006

12,516

Loans to public

2,880,101

2,889,463

Total assets

5,007,891

4,894,960

839,556

578,322

2,903,008

Derivatives measured at fair value

7,650

Financial liabilities not measured at fair value:

Deposits from credit institutions and central banks

473,399

Deposits and borrowings from customers

3,973,320

3,974,360

Debt securities issued

259,225

238,277

Total liabilities

4,713,594

4,693,686

245,927

3,974,360

Fair values of financial assets and liabilities of the Bank on 31 December 2021

Fair value hierarchy (where applicable)

Carrying

value

Total fair

value

Quoted

market

prices

Valuation

technique -

observable

inputs

Valuation

technique –

non-market

observable

inputs

Financial assets measured at fair value through other

comprehensive income:

Debt securities

233,166

161,592

71,574

Equity instruments

203

Non-trading financial assets mandatorily at fair value

through profit or loss:

Equity instruments

1,076

Other financial instruments

7,400

Other financial assets at fair value through profit or loss

Derivatives

4,303

Financial assets not measured at fair value:

Cash and balances at central banks

361,626

Loans to credit institutions

35,693

Debt securities

1,419,142

1,420,473

1,269,110

131,875

19,488

Loans to public

2,609,713

2,620,836

Total assets

4,672,322

4,684,776

1,438,102

207,752

2,641,603

Derivatives measured at fair value

739

Financial liabilities not measured at fair value:

Deposits from credit institutions and central banks

499,628

Deposits and borrowings from customers

3,665,524

3,666,588

Debt securities issued

258,895

259,344

Total liabilities

4,424,786

4,426,299

260,083

3,666,588

Changes in fair value of securities accounted for at fair value and categorised as Level 3

EUR thousands

2022

2021

2022

2021

Group

Bank

As of the beginning of the period, net

1,279

1,248

1,279

1,248

Total comprehensive income

Revaluation gain

1,662

Transfer to income statement on settlement

(1,912)

As of the end of the period, net

1,029

1,279

1,029

1,279

Fair value for equity instruments for which fair value is calculated based on non-market observable inputs is categorised as Level 3,

as these financial instruments are not listed on an exchange and there are insufficient recent observable transactions on the market.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 62

Changes in fair value of deposits and borrowings from customers measured at fair value and categorised as Level 3

EUR thousands

2022

2021

Group

Balance as at the beginning of the period

13,973

14,381

Premiums received

1,230

3,365

Commissions and risk charges

(520)

(383)

Paid to policyholders

(10,334)

(3,494)

Other

Currency revaluation result

(5)

Balance as at the end of the period

4,350

13,973

In the year ended 31 December 2022 from financial liabilities designated at fair value through profit or loss which are not unit-linked

the Group has recognised net revaluation result of EUR 80 thousand in the net financial income line of the statement of income (2021:

EUR 53 thousand). The amount of change in 2022 in the fair value of the financial liabilities that is attributable to changes in the credit

risk of the liabilities measured at fair value is EUR 340 thousand (2021: EUR 63 thousand). Most of the insurance business the Group

is involved in relates to investment contracts rather than insurance risk; therefore, premiums received are recognised as liabilities of

the Group since settlement in due course is expected. The amount of insurance risk generated by the Group currently is not significant

and, therefore, not further disclosed in detail in these financial statements.

NOTE 33. RELATED PARTIES

Related parties are defined as shareholders who have significant influence or joint control over the Group, members of the Supervisory

Board and Management Board, key Management personnel, their close relatives and companies in which they have a controlling

interest as well as the Group’s subsidiaries and associated companies. For the purpose of this disclosure, the key management of

the Group and the Bank and their related companies are stated in one line. All transactions with related parties were made on terms

equivalent to those that prevail in arm’s length transactions. Outstanding balances and terms of the Group’s and the Bank’s

transactions in this note are shown with related parties which were related parties at that time.

Assets and liabilities from transactions with related parties

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Credit exposures to related parties, net

Loans to public and credit institutions

Management

392

293

241

130

Consolidated subsidiaries and associates

1,063,231

974,089

Investments in subsidiaries

47,580

76,808

Investments in associates

190

279

190

279

Non-current assets and disposal groups held for sale

13,805

Other assets

126

Financial commitments and guarantees outstanding

100

6,215

66,043

216,401

Credit exposures to related parties, net

718

6,799

1,191,131

1,267,833

Liabilities to related parties

Deposits and borrowings from customers and credit

institutions

Management

1,326

1,137

1,326

1,137

Consolidated subsidiaries and associates

1,854

1,376

23,816

52,773

Other liabilities (including lease liabilities) and

provisions for expected credit losses

338

Liabilities to related parties

3,182

2,579

25,223

54,248

As at 31 December 2022 no assets with consolidated subsidiaries were credit impaired (2020: none). The recognised expected credit

losses on non-credit impaired exposures with consolidated subsidiaries as at 31 December 2022 was EUR 1.33 million (2021: EUR

1.28 million).

In 2022 an increase of EUR 0.09 million in allowances for expected credit losses for loans from consolidated subsidiaries was

recognised (2021: EUR 1.03 million increase). The increase in expected credit loss allowances in 2021 was primarily driven by EUR

771.8 million additional lending to subsidiaries to fund leasing and factoring business. The ultimate recoverability of the loans issued

to subsidiaries depends on the performance of the underlying business of the respective subsidiaries. For information on investments

in subsidiaries refer to Note 19 (Investments in Related Entities).

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 63

Income and expense from transactions with related parties

EUR thousands

2022

2021

2022

2021

Group

Bank

Interest income

Management

Consolidated subsidiaries and associates

24,606

16,943

Interest expense

Consolidated subsidiaries

(75)

(194)

Shareholders (EBRD)

(683)

Fee and commission income

142

102

1,509

2,079

Fee and commission expense

(4)

(5)

(4)

(5)

Net financial income

Dividends from subsidiaries

8,684

All other income

1,611

1,485

Administrative and other expense (excluding

management’s remuneration Note 9 and ECL)

(2,131)

(2,010)

(2,131)

(2,009)

For information on the management’s remuneration refer to Note 9 (Staff Costs). The Group’s and the Bank’s administrative expense

mostly relates to Advisory Services Agreement fee. The Bank has entered into the Advisory Services Agreement with Ripplewood

Advisors LLC, where Ripplewood is paid EUR 2.0 million per annum for the services provided to the Bank. These advisory services

include business plan development, strategic analysis, capital allocation, risk advisory, operating efficiency, human resource

management, and other services.

In 2021 on acquisition of SIA UniCredit Leasing (renamed to SIA Citadele Leasing) had a borrowing from European Bank for

Reconstruction and Development (EBRD). The interest expense to shareholders (EBRD) in 2021 represents the amounts paid for the

EBRD borrowing. The borrowed amount was repaid fully to the EBRD in 2021.

NOTE 34. GEOGRAPHICAL DISTRIBUTION OF REVENUE

The geographical distribution of certain items by the country where the business is carried out

2022

2021

EUR millions

FTE

equivalent

employees

at the period

end

EUR millions

FTE

equivalent

employees

at the period

end

Operating

income

Operating

profit

before tax

Income

tax

expense

Operating

income

Operating

profit

before tax

Income

tax

expense

Latvia

121.1

39.8

(1.1)

978

110.6

45.6

979

Lithuania

36.1

9.5

(1.2)

261

29.2

15.3

(1.6)

250

Estonia

11.0

3.5

9.9

3.1

Total continuing operations

168.2

52.8

(2.3)

1,329

149.7

64.0

(1.6)

1,310

Latvia (result from non-current assets

held for sale)

0.3

(0.2)

Switzerland (discontinued operations)

4.4

(4.5)

4.0

(7.2)

Total operations

172.6

48.6

(2.3)

1,355

153.7

56.6

(1.6)

1,335

During the reporting period EUR 0.0 million of direct public subsidies were received from the public sector of the respective countries

where the Group operates (2021: EUR 0.0 million). The Bank and the Group has participated in the ECB's targeted longer-term

refinancing operations (TLTRO-III) since 24 June 2020. For more information refer to Note 23 (Deposits from Credit Institutions and

Central Banks). For TLTRO-III participating banks meeting the ECB’s specified lending criteria, interest rate was as low as -1.0% for

a specific reference period. Based on an internal assessment, part of the inflow of economic benefits from TLTRO-III borrowing with

negative effective interest rate, which may be justified as market rate, is recognised within interest income. The remainder is a benefit

of below-market rate of interest and is recognised within the other income as a support or compensation for the fulfilment of the

required obligations and supporting customer needs. In the reporting period EUR 1.0 million (2021: EUR 2.7 million) was recognised

as a support for the fulfilment of the required government obligations. For details refer to Note 8 (Net Other Income).

NOTE 35. RISK MANAGEMENT

Risk management policies

The Group considers risk management to be an essential component of its management process. The Group pursues prudent risk

management that is aligned with its business ambitions and aims to achieve effective risk mitigation. In order to assess and monitor

complex risk exposures, the Group applies a wide range of risk management tools in conjunction with risk committees. Members of

the risk committees represent various operations of the Group in order to balance business and risk within the respective risk

committees. Annually Group defines its Risk Appetite Framework which sets acceptable risk-taking limits across all relevant risk types,

considering business goals, macroeconomic environment and regulatory setting. Risk appetite limits are cascaded to all risk

management strategies and implemented operationally through detailed internal regulations.

The Group’s risk management principles are set out in its Risk Management Policy. The Group adheres to the following key risk

management principles:

▪ The Group aims to ensure that it maintains low overall risk exposure, diversified asset portfolio, limited risks in financial

markets and low levels of operational risk;

▪ The Group aims to ensure an acceptable risk level in all operations. Risks are always assessed in relation to their expected

return. Risk exposures that are not acceptable are avoided, limited or hedged;

▪ The Group does not assume high or uncontrollable risks irrespective of the return they provide and assumes risks only in

economic fields and geographical regions in relation to which it believes it has sufficient knowledge and expertise;

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 64

▪ Risk management is based on each Group’s employee’s responsibility for the transactions carried out by him/her and

awareness of the related risks;

▪ Risk limit system and strict controls are essential risk management elements. Control over risk levels and compliance with the

imposed limits is achieved by the existence of structured risk limit systems for all material risks.

The aim of the risk management in the Group is to facilitate the achievement of the Group’s goals, sustainable growth, long-term

financial stability and to protect the Group from unidentified risks. The Bank has appointed a Risk Director (CRO) who is a member of

the Bank's Management Board and whose responsibilities do not include the duties related to the activities under control. The CRO

has a direct access to the Bank's Supervisory Board. The Risk Committee, which is subordinated to the Bank's Supervisory Board,

has been established in the Bank. The main task of the Risk Committee is to provide support to the Bank's Supervisory Board in

relation to the monitoring of the Group's risk management system. The Risk Committee established by the Bank's Supervisory Board

provides recommendations to the Bank's Management Board regarding improvements of the risk management system. Risk

management within the Group is controlled by an independent unit – the Risk Management Division.

The main risks to which the Group is exposed are: credit risk, market risk, interest rate risk, liquidity risk, currency risk and operational

risk. For each of these risks the Group has approved risk management policies and other internal regulations defining key risk

management principles and processes, functions and responsibilities of units, risk concentration limits, as well as control and reporting

system. The Bank’s Supervisory Board approves risk management policies and ensures the control of efficiency of the risk

management system. The Bank's Management Board and CRO ensure implementation of the risk management policies and

development of internal regulations for the management of each material risk within the Group. In order to assess and monitor material

and complex risk exposures, the Bank's Management Board establishes risk committees. Members of risk committees represent

various units of the Group in order to ensure the balance between the units responsible for risk monitoring and control and the units

with business orientation.

The Group’s risk management frameworks for each of the above-mentioned risks are briefly summarised below.

Credit risk

Credit risk is the risk that the Group will incur a loss from debtor’s non-performance or default. The Group is exposed to credit risk in

its lending, investing and transaction activities, as well as in respect of the guarantees issued to or received from third parties and

other off-balance sheet commitments to third parties. Credit risk management is performed pursuant to the Credit Risk Management

Policy. The goal of the credit risk management is to ensure a sound, sustainable and diversified loan and securities portfolios, which

generates returns that correspond to the assumed level of risk and are characterized by high resilience against external shocks.

Credit risk management is based on an adequate assessment of a credit risk and a proper decision-making in relation to such risk.

The lending decision is based on repayment capacity of the borrower and an additional alternative recovery option in case of default

or material deterioration of the borrower’s risk profile.

In cases when significant risk is to be undertaken, the credit risk analysis is performed by independent units of the Risk Division. The

credit risk analysis consists of risk identification, PD calculation, an assessment of customer’s creditworthiness and collateral quality

and liquidity. The analysis of a legal entity’s creditworthiness includes risk identification and an assessment of the shareholder

structure and management, industry and peers, business model and project financed as well as an analysis of its credit history and

current and forecasted financial situation and its sensitivity to key risk drivers and analysis of ESG factors. The assessment of a private

individual’s creditworthiness consists of the credit history and affordability analysis. For significant exposures decision on loan

origination is taken by the Credit Committee and approved by the Bank’s Management Board.

In relation to the acquisition of corporate bonds, the Group always analyses the business profile and financial performance of the

issuer, taking into consideration the credit ratings assigned to it by international rating agencies or performs internal counterparty

financial analysis, if external rating is not assigned, as well as market-based indicators. Sovereign bonds are assessed similarly, but

with an emphasis on different fundamental factors, including the country’s economic strength, institutional strength, financial strength

of the government, political risks and other relevant factors.

After a loan is issued, the client’s financial position, early warning indicators, payment discipline and client’s ability to meet contractual

obligations are being regularly evaluated and monitored to timely identify credit quality deterioration and apply appropriate

classification.

The Group monitors its loan portfolio and securities portfolio and regularly assesses its structure, quality, concentration levels, portfolio

performance trends and overall risk level. The Group takes measures for limiting credit risk concentration by diversifying the portfolio

and setting credit risk concentration limits. To limit its credit risk, the Group has set the following concentration limits: individual

counterparty and issuer limits, maximum exposure limit linked to a particular risk class of counterparty/issuer, limit for internally risk

weighted exposures in a particular country/sector combination, limit for groups of mutually related customers, limit for large risk

exposures, limit for transactions with the Group’s related parties, industry limit, limit by customer type, loan product type, control of

compliance with credit risk concentration limits. Credit risk identification, monitoring and reporting is the responsibility of the Risk

Management Division.

In addition to the credit risk, which is inherent in the Group’s loan portfolio and fixed income securities portfolio, the Group is also

exposed to credit risk as a result of its banking relationships with multiple credit institutions which it maintains in order to process

customer transactions in a prompt and efficient manner. The Group manages its exposure to commercial banks and brokerage

companies by monitoring on a regular basis the credit ratings of such institutions, conducting due diligence of their credit profiles and

monitoring the individual exposure limits applicable to counterparties set by the Financial Market and Counterparty Risk Committee

(FMCRC). The Group’s exposures to derivative counterparties arise from its activities in managing foreign exchange risk. Risk appetite

for the open foreign exchange position is low, and the Group executes counterparty risk assessment and accepts only counterparties

which are within its risk appetite limits.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 65

Loan to value of loans to public

Estimated fair value of loan collateral is presented separately for those assets where collateral and other credit enhancements exceed

carrying value of the asset (LTV < 100%) and those assets where collateral and other credit enhancements are equal to or less than

the carrying value of the asset (LTV ≥ 100%).

Group, EUR thousands

31/12/2022

31/12/2021

LTV < 100%

LTV ≥ 100% and

unsecured

LTV < 100%

LTV ≥ 100% and

unsecured

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Regular loans and

credit lines

1,545,586

3,848,663

223,781

57,330

1,359,310

3,245,902

238,794

49,592

Finance leases

565,287

948,658

495,302

371,666

343,779

552,683

639,085

465,446

Card lending

304

60,353

369

59,777

Factoring

612

720

63,064

53,120

Other loans

12,419

7,558

Total net loans to

public

2,111,559

4,798,345

854,919

429,011

1,703,175

3,798,954

998,334

515,049

Including Stage 3

classified exposures

41,935

132,118

4,255

2,474

43,244

179,787

12,039

8,388

Bank, EUR thousands

31/12/2022

31/12/2021

LTV < 100%

LTV ≥ 100% and

unsecured

LTV < 100%

LTV ≥ 100% and

unsecured

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Carrying

value of

assets

Estimated

fair value of

collateral

Regular loans and

credit lines

1,538,255

3,830,733

205,769

50,247

1,350,697

3,226,245

217,506

43,862

Card lending

304

60,353

369

59,777

Other loans

12,419

7,558

Loans to subsidiaries

1,063,231

1,003

1,155

973,086

Total net loans to

public

1,538,329

3,831,037

1,341,772

50,262

1,351,786

3,227,769

1,257,927

43,873

Including Stage 3

classified exposures

27,773

99,525

683

29,133

147,729

1,200

101

Collateral value is determined using estimated fair value of the real estate, other pledged assets and qualifying high-quality guarantees

issued by state development or similar institutions. The loan guarantee issued by the EIB Group (consisting of the EIB and EIF) to

Citadele in the amount exceeding EUR 300 million is included as qualifying high-quality guarantee. Personal guarantees from

households or unrated non-financial enterprises are not included. Mostly, loans falling into category “Regular loans and credit lines”

are secured by collateral of immovable property or commercial pledges. In general, card loans and consumer lending products, which

are presented as regular loans, are unsecured and granted based on client’s creditworthiness assessment. For loans to the leasing

subsidiaries of the Group, no formal tangible collateral is required. The intragroup financing is used to originate finance leases to

clients. Full compliance with lending guidelines of the Group are obeyed by subsidiaries when originating leases to clients. Finance

leases are secured by the respective property leased-out. Most factoring balances are originated under recourse terms, many are

insured with reputable third parties. Insurance coverage is not considered an eligible collateral for the purposes of this disclosure.

Events in Ukraine and Russian sanctions

The new laws, policies and sanctions, including sanctions imposed on Russia, are implemented. Consistently with long standing

Citadele’s objective to become the leading financial services provider in the Baltics, internal risk exposure limits with Russia, other

CIS countries and Ukraine have been low. As 31 December 2022 the carrying amount of the Group’s direct credit exposures with

parties domiciled in Russia, Belarus and Ukraine are less than EUR 2.0 million. Additionally, carrying value of the Bank’s investments

in collective investment funds with direct exposure to eastern Europe is around EUR 1.1 million. Of these funds, direct exposures to

the above countries are only a part of the overall investment funds’ holdings. The indirect impact from these events is regularly

monitored.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 66

Assets, liabilities and off-balance sheet items by geographical profile

Group as of 31/12/2022, EUR thousands

Latvia

Lithuania

Estonia

Other EU

countries and

development

banks

Other

countries

Total

Assets

Cash and cash balances at central banks

303,481

227,854

695

532,030

Loans to credit institutions

6,397

12,857

29,187

48,441

Debt securities

412,074

609,961

103,258

346,060

121,250

1,592,603

Loans to public

1,353,896

1,121,611

477,144

9,667

4,160

2,966,478

Equity instruments

929

1,029

Other financial instruments

14,778

13,494

201

28,473

Derivatives

1,255

1,285

Discontinued operations

2,034

1,715

75,136

87,143

166,028

Other assets

53,539

8,682

5,078

578

67,912

Total assets

2,147,475

1,969,823

586,175

457,901

242,905

5,404,279

Liabilities

Deposits from credit institutions and central

banks

466,982

2,465

229

469,736

Deposits and borrowings from customers

3,032,250

768,933

80,184

19,518

79,376

3,980,261

Debt securities issued

259,225

Derivatives

6,657

990

7,650

Discontinued operations

14,892

37,205

106,890

158,999

Other liabilities

85,154

11,756

7,036

163

104,190

Total liabilities

3,865,160

780,752

87,232

60,259

186,658

4,980,061

Off-balance sheet items

Contingent liabilities

10,650

38,662

606

422

50,407

Financial commitments

203,664

87,143

9,677

2,181

4,025

306,690

For additional information on geographical distribution of securities exposures please refer to Note 15 (Debt Securities). Investments

in mutual funds are not analysed by their ultimate issuer and are classified as other financial instruments. From the Group’s loans to

credit institutions presented as "Other countries" EUR 23.5 million is with United States registered credit institutions (2021: EUR 23.6

million). From the Group's discontinued operations presented as "Other countries" EUR 6.7 million is central banks balances with

Swiss National Bank (2021: EUR 9.4 million) and EUR 24.7 million are with Swiss credit institutions (2021: EUR 20.0 million).

Group as of 31/12/2021, EUR thousands

Latvia

Lithuania

Estonia

Other EU

countries

Other

countries

Total

Assets

Cash and cash balances at central banks

270,249

88,875

2,502

9,399

371,025

Loans to credit institutions

3,201

406

6,017

49,102

58,742

Debt securities

481,772

635,869

96,982

421,132

165,965

1,801,720

Loans to public

1,299,294

1,000,969

380,421

9,372

11,453

2,701,509

Equity instruments

124

1,076

1,279

Other financial instruments

25,759

15,811

462

42,032

Derivatives

4,182

106

4,303

Other assets

56,812

9,527

5,146

2,436

73,951

Total assets

2,141,393

1,735,271

485,457

452,547

239,893

5,054,561

Liabilities

Deposits from credit institutions and central

banks

477,065

2,153

479,235

Deposits and borrowings from customers

2,845,249

669,061

62,472

53,821

183,260

3,813,863

Debt securities issued

258,895

Derivatives

357

125

200

739

Other liabilities

76,081

12,177

12,463

4,001

104,754

Total liabilities

3,657,647

681,363

74,935

56,206

187,335

4,657,486

Off-balance sheet items

Contingent liabilities

7,498

25,747

637

121

262

34,265

Financial commitments

229,014

131,811

23,153

322

3,643

387,943

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 67

Bank as of 31/12/2022, EUR thousands

Latvia

Lithuania

Estonia

Other EU

countries and

development

banks

Other

countries

Total

Assets

Cash and cash balances at central banks

303,481

227,854

695

532,030

Loans to credit institutions

12,857

29,187

42,044

Debt securities

404,436

603,369

101,281

332,055

109,160

1,550,301

Loans to public

1,985,252

644,246

237,097

9,520

3,986

2,880,101

Equity instruments

929

1,029

Other financial instruments

1,101

Derivatives

1,255

1,285

Other assets

85,616

8,584

3,407

496

13,859

111,962

Total assets

2,781,162

1,484,053

342,480

355,037

157,121

5,119,853

Liabilities

Deposits from credit institutions and central

banks

466,982

2,465

3,892

473,399

Deposits and borrowings from customers

3,028,446

768,928

80,330

19,318

76,298

3,973,320

Debt securities issued

259,225

Derivatives

6,657

990

7,650

Other liabilities

25,072

6,624

1,166

176

33,054

Total liabilities

3,786,382

775,615

81,496

22,789

80,366

4,746,648

Off-balance sheet items

Contingent liabilities

10,643

38,662

606

10,972

60,936

Financial commitments

228,839

74,292

18,689

306

322,211

For additional information on geographical distribution of securities exposures please refer to Note 15 (Debt Securities). From the

Bank’s loans to credit institutions presented as "Other countries" EUR 23.5 million with United States registered credit institutions

(2021: EUR 23.6 million).

Bank as of 31/12/2021, EUR thousands

Latvia

Lithuania

Estonia

Other EU

countries

Other

countries

Total

Assets

Cash and cash balances at central banks

270,249

88,875

2,502

361,626

Loans to credit institutions

6,578

29,115

35,693

Debt securities

470,922

626,137

94,838

335,844

124,567

1,652,308

Loans to public

1,829,828

584,948

181,119

9,097

4,721

2,609,713

Equity instruments

124

1,076

1,279

Other financial instruments

7,400

Derivatives

4,182

106

4,303

Other assets

101,248

9,314

3,191

13,820

127,574

Total assets

2,683,953

1,309,289

281,650

351,705

173,299

4,799,896

Liabilities

Deposits from credit institutions and central

banks

477,065

2,153

20,410

499,628

Deposits and borrowings from customers

2,834,407

669,457

61,133

15,602

84,925

3,665,524

Debt securities issued

258,895

Derivatives

357

125

200

739

Other liabilities

22,127

6,565

809

29,547

Total liabilities

3,592,851

676,147

61,942

17,987

105,406

4,454,333

Off-balance sheet items

Contingent liabilities

7,477

25,747

637

4,950

38,863

Financial commitments

266,091

138,314

26,229

322

109

431,065

Market risk

Market risk is the risk that the Group will incur a loss as a result of the mark-to-market revaluation of balance sheet and off-balance

sheet items caused by changes in market values of financial instruments due to changes in foreign exchange rates, interest rates and

other factors.

The position risk of financial instruments is managed through diversification by country, sector, industry and elaborate limit control.

Issuers are internally risk graded. The exposure level limits, after in depth analysis, are set by the FMCRC, observing concentration

risk levels set in the Group’s Risk Strategy and other rules set by the Group Investment Committee (GIC) and specified in the Risk

Strategy. The decisions of GIC and FMCRC are approved by the Management Board

To assess position risk the Group uses sensitivity and scenario analysis, which identifies and quantifies the negative impact of adverse

events on the portfolio of the Group taking into consideration regional, sector profiles of the portfolio and credit rating risk profiles of

issuers.

If market prices of the Groups investments in equities and mutual investment funds were to change by 5%, the net result of the Group

would change by EUR 1.47 million (2021: EUR 2.16 million) and securities fair value revaluation reserve by EUR 0.0 million (2021:

EUR 0.0 million) and the net result of the Bank would change by EUR 0.1 million (2021: EUR 0.4 million) and securities fair value

revaluation reserve by EUR 0.0 million (2021: EUR 0.0 million).

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 68

Interest rate risk

Interest rate risk is related to the possible negative impact of changes in general interest rates on the Group’s income and economic

value.

Interest rate risk management in the Group is carried out in accordance with Interest Rate Risk Management Policy. Interest rate risk

is assessed, and decisions are taken by the Assets and Liabilities Management Committee (ALCO). The decisions of the ALCO are

approved by the Bank’s Management Board. Acceptable interest rate risk level accompanied with the relevant limits is defined in the

Group's Risk appetite framework and Risk strategy, ALCO monitors the compliance with the approved limits and use of the instruments

for the management of interest rate risk. Interest rate risk measurement, management and reporting are responsibilities of the Treasury

Division, while the Risk Management Division ensures proper oversight and prepares analytical reports to the ALCO and the Bank’s

Management Board.

The Group manages interest rate risk by using repricing gap analysis of the risk sensitive assets and liabilities, duration analysis of

assets and liabilities as well as stress testing. Group sets limits for the impact of interest rate shock on economic value, net interest

income and revaluation reserve. Based on the market analysis and the Group’s financing structure, the ALCO sets the interest rates

for customer deposits.

The following table represents the impact of a parallel change in yield curve by 100 basis points on the Group’s and the Bank’s profit

before tax (including the effect on interest income and expense over 12-month period) and revaluation reserve in equity arising from

securities accounted at fair value. Scenarios incorporate zero floor interest rate if such a condition exists in the loan agreement. Retail

customer deposit rates are assumed to be constrained by a zero-lower bound. Group’s figures are estimated from entities that bear

significant interest rate risk: AS Citadele banka, Kaleido Privatbank AG and the Group's leasing and factoring companies (2021: AS

Citadele banka and Kaleido Privatbank AG).

31/12/2022, EUR thousands

Total for all currencies

EUR only

USD only

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Bank

+100 basis points scenario

2,309

(4,930)

2,298

(3,304)

121

(1,366)

-100 basis points scenario

(12,069)

5,342

(11,640)

3,558

(540)

1,503

Group

+100 basis points scenario

6,219

(4,961)

6,191

(3,323)

158

(1,377)

-100 basis points scenario

(16,171)

5,374

(15,646)

3,579

(655)

1,514

31/12/2021, EUR thousands

Total for all currencies

EUR only

USD only

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Profit / (loss)

before

taxation

Securities

fair value

revaluation

reserve

Bank

+100 basis points scenario

1,726

(8,219)

1,653

(6,360)

(1,425)

-100 basis points scenario

3,556

8,645

3,934

6,669

(384)

1,513

Group

+100 basis points scenario

5,119

(9,179)

5,093

(6,853)

(1,887)

-100 basis points scenario

4,082

9,629

4,548

7,176

(460)

1,987

Currency risk

Currency risk is a risk of loss arising from fluctuations in currency exchange rates.

Currency risk management in the Group is carried out in accordance with Currency Risk Management Policy and limits set in the

Group’s Risk Appetite Framework and Risk Strategy. FMCRC oversees and assess currency risk level within the Group, monitors

compliance and the fulfilment of the limits, and sets limits for individual dealing desks within the overall risk limits. The decisions of

the FMCRC are approved by the Bank’s Management Board.

Day-to-day currency risk management is the responsibility of the Treasury Division, while risk monitoring and reporting is the

responsibility of the Risk Management Division.

The Group has a low risk appetite for foreign exchange risk. The Group aims to keep exposures at levels that would produce a small

net impact even in periods of high volatility. Several well-known methodologies are used to measure and manage foreign exchange

risk including a conservative limit for a daily value-at-risk exposure. The Group is in full compliance with the currency position

requirements of Latvian legislation and sets its internal limits more prudently than the regulatory limits.

In the event of exchange rates for the following currencies in which the Group and the Bank has net open positions adversely change

as per scenario below, the potential total decrease in the Group’s and Bank’s total equity (ignoring any tax effect) would amount

approximately to the following:

Group, EUR thousands

31/12/2022

31/12/2021

Scenario:

USD

CHF

Other

currencies

USD

CHF

Other

currencies

2% adverse change

5% adverse change

182

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 69

Bank, EUR thousands

31/12/2022

31/12/2021

Scenario:

USD

CHF

Other

currencies

USD

CHF

Other

currencies

2% adverse change

5% adverse change

Assets, liabilities and off-balance sheet items by currency profile

Group as of 31/12/2022, EUR thousands

EUR

USD

CHF

GBP

Other

Total

Assets

Cash and cash balances at central banks

531,706

324

532,030

Loans to credit institutions

14,074

30,410

140

3,784

48,441

Debt securities

1,524,702

54,649

10,665

2,587

1,592,603

Loans to public

2,957,494

8,939

2,966,478

Equity instruments

100

929

1,029

Other financial instruments

21,331

6,824

318

28,473

Derivatives

1,285

Discontinued operations

55,265

66,832

40,188

2,318

1,425

166,028

Other assets

66,980

179

753

67,912

Total assets

5,172,937

169,086

40,221

13,441

8,594

5,404,279

Liabilities

Deposits from credit institutions and central

banks

463,863

211

2,047

3,607

469,736

Deposits and borrowings from customers

3,664,875

277,787

2,894

20,572

14,133

3,980,261

Debt securities issued

259,225

Derivatives

7,650

Discontinued operations

54,809

81,673

18,773

2,319

1,425

158,999

Other liabilities

104,015

174

104,190

Total liabilities

4,554,437

359,642

21,878

24,938

19,166

4,980,061

Equity

428,928

(4,066)

(25)

(583)

(36)

424,218

Total liabilities and equity

4,983,365

355,576

21,853

24,355

19,130

5,404,279

Net balance sheet position

189,572

(186,490)

18,368

(10,914)

(10,536)

Net off-balance sheet foreign exchange contracts

(191,369)

186,378

(22,007)

11,235

10,528

(5,235)

Net long/ (short) total position

(1,797)

(112)

(3,639)

321

(8)

(5,235)

Group as of 31/12/2021, EUR thousands

EUR

USD

CHF

GBP

Other

Total

Assets

Cash and cash balances at central banks

359,896

1,303

9,399

366

371,025

Loans to credit institutions

21,217

33,464

188

330

3,543

58,742

Debt securities

1,669,674

101,770

11,227

16,226

2,823

1,801,720

Loans to public

2,682,943

12,830

5,726

2,701,509

Equity instruments

203

1,076

1,279

Other financial instruments

33,719

7,899

414

42,032

Derivatives

4,303

Other assets

70,816

162

2,411

562

73,951

Total assets

4,842,771

158,504

28,951

17,031

7,304

5,054,561

Liabilities

Deposits from credit institutions and central

banks

475,815

115

3,259

479,235

Deposits and borrowings from customers

3,450,918

304,822

12,547

19,392

26,184

3,813,863

Debt securities issued

258,895

Derivatives

739

Other liabilities

100,736

3,991

104,754

Total liabilities

4,287,103

304,962

16,538

19,438

29,445

4,657,486

Equity

397,845

(752)

(33)

(14)

397,075

Total liabilities and equity

4,684,948

304,210

16,567

19,405

29,431

5,054,561

Net balance sheet position

157,823

(145,706)

12,384

(2,374)

(22,127)

Net off-balance sheet foreign exchange contracts

(155,050)

145,137

(11,370)

2,915

22,063

3,695

Net long/ (short) total position

2,773

(569)

1,014

541

(64)

3,695

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 70

Bank as of 31/12/2022, EUR thousands

EUR

USD

CHF

GBP

Other

Total

Assets

Cash and cash balances at central banks

531,706

324

532,030

Loans to credit institutions

7,677

30,410

140

3,784

42,044

Debt securities

1,482,401

54,649

10,665

2,586

1,550,301

Loans to public

2,871,171

8,930

2,880,101

Equity instruments

100

929

1,029

Other financial instruments

1,101

Derivatives

1,285

Other assets

97,269

136

13,805

752

111,962

Total assets

4,992,710

95,378

13,838

10,805

7,122

5,119,853

Liabilities

Deposits from credit institutions and central

banks

463,920

3,610

215

2,047

3,607

473,399

Deposits and borrowings from customers

3,665,415

270,305

2,893

20,574

14,133

3,973,320

Debt securities issued

259,225

Derivatives

7,650

Other liabilities

32,870

178

33,054

Total liabilities

4,429,080

274,093

3,113

22,621

17,741

4,746,648

Equity

376,920

(3,095)

(584)

(36)

373,205

Total liabilities and equity

4,806,000

270,998

3,113

22,037

17,705

5,119,853

Net balance sheet position

186,710

(175,620)

10,725

(11,232)

(10,583)

Net off-balance sheet foreign exchange contracts

(191,369)

175,148

(10,728)

11,235

10,527

(5,187)

Net long/ (short) total position

(4,659)

(472)

(3)

(56)

(5,187)

Bank as of 31/12/2021, EUR thousands

EUR

USD

CHF

GBP

Other

Total

Assets

Cash and cash balances at central banks

359,896

1,303

366

361,626

Loans to credit institutions

5,694

28,332

1,519

35,693

Debt securities

1,566,334

68,968

14,322

2,684

1,652,308

Loans to public

2,596,929

12,784

2,609,713

Equity instruments

203

1,076

1,279

Other financial instruments

7,400

Derivatives

4,303

Other assets

113,099

109

13,805

561

127,574

Total assets

4,653,858

112,572

13,886

14,450

5,130

4,799,896

Liabilities

Deposits from credit institutions and central

banks

477,354

18,805

3,419

499,628

Deposits and borrowings from customers

3,382,385

239,379

2,553

17,342

23,865

3,665,524

Debt securities issued

258,895

Derivatives

739

Other liabilities

29,504

29,547

Total liabilities

4,148,877

258,224

2,555

17,390

27,287

4,454,333

Equity

346,170

(557)

(35)

(15)

345,563

Total liabilities and equity

4,495,047

257,667

2,555

17,355

27,272

4,799,896

Net balance sheet position

158,811

(145,095)

11,331

(2,905)

(22,142)

Net off-balance sheet foreign exchange contracts

(155,050)

145,137

(11,370)

2,915

22,063

3,695

Net long/ (short) total position

3,761

(39)

(79)

3,695

The investment in the Group’s Swiss subsidiary Kaleido Privatbank AG, which is carried at cost, is shown as a CHF exposure, as the

recoverability of this asset will ultimately depend on the Swiss currency’s performance.

Liquidity risk

Liquidity risk is the risk that the Group will be unable to meet its legal payment obligations. The purpose of liquidity risk management

is to ensure the availability of liquid assets to cover any possible gaps between cash inflows and outflows as well as to secure sufficient

funding for lending and investment activities.

The Group manages its liquidity risk in accordance with Liquidity Risk Management Policy. The management and reporting of liquidity

risk is coordinated by the Treasury Division, and the risk is assessed and decisions are taken by the ALCO. The decisions of the

ALCO are approved by the Bank’s Management Board. The Risk Management Division on a monthly basis provides information to

the ALCO and the Bank’s Management Board and Supervisory Board about the level of the assumed risk as part of the reporting and

supervision process.

Liquidity risk for the Group is assessed in each currency in which the Group has performed a significant amount of transactions.

Liquidity risk limits are reviewed at least once a year and also when there are major changes to the Group’s operations or external

factors affecting its operations. A liquidity crisis management plan has been developed and is updated on a regular basis.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 71

One of the crucial tools used to evaluate liquidity risk is scenario analysis. Several scenarios of different severity and duration are

employed by the Group with risk tolerances defined for the outcomes of those scenarios. Furthermore, the Group has developed a

system of liquidity risk limits and early warning indicators and systematically prepares cash flow forecasts which incorporate

assumptions about the most likely flow of funds over the period of one year. For general assessment of existing gaps between

contractual maturities of assets and liabilities without any assumptions on customer behaviour, the Group regularly analyses liquidity

term structure and sets corresponding risk tolerances.

The Group’s balance sheet structure is planned for at least a one-year period and is aligned with development plans for the current

period. The major current and potential funding sources are regularly analysed and controlled across the Group. The Group maintains

regular contact with its interbank business partners and creditors with the aim of projecting possible deadlines for repayment or

prolongation of funding sources as well as absorption of excess liquidity.

Liquidity coverage ratio

The general principles of the liquidity coverage ratio (LCR) as measurements of the Bank’s and the Group’s liquidity position is defined

in the Regulation (EC) No 575/2013. The Commission Delegated Regulation (EU) 2015/61 defines general LCR calculation principles

in more details. The minimum LCR requirement is 100% and it represents the amount of liquidity available to cover calculated net

future liquidity outflows. The Bank and the Group is compliant with LCR requirements.

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Liquidity buffer

1,304,068

1,255,477

1,256,246

1,190,783

Net liquidity outflow

742,186

635,011

777,402

727,528

Liquidity coverage ratio

176%

198%

162%

164%

Net stable funding ratio (including net result for the period)

The net stable funding ratio (NSFR) is defined in the Regulation (EC) No 575/2013. NSFR is the ratio of the available amount of stable

funding to the required amount of stable funding over one-year horizon. The minimum NSFR requirement is 100%.

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Total available stable funding

3,783,818

3,872,201

3,739,699

3,749,691

Total required stable funding

2,844,055

2,849,583

1,925,681

2,138,255

Net stable funding ratio

133%

136%

194%

175%

Assets, liabilities and off-balance sheet items by contractual maturity

Group as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over 5

years and

undated

Total

Assets

Cash and cash balances at central banks

532,030

Loans to credit institutions

25,384

23,057

48,441

Debt securities

21,111

14,382

325,615

141,591

695,139

394,765

1,592,603

Loans to public

142,133

109,438

189,547

323,559

1,563,903

637,898

2,966,478

Equity instruments

1,029

Other financial instruments

28,473

Derivatives

960

325

1,285

Discontinued operations

34,268

21,724

11,061

20,249

69,321

9,405

166,028

Other assets

35,025

553

114

172

1,029

31,019

67,912

Total assets

790,911

169,479

526,337

485,571

2,329,392

1,102,589

5,404,279

Liabilities

Deposits from credit institutions and central

banks

736

430,000

39,000

469,736

Deposits and borrowings from customers

2,848,636

206,199

281,831

595,524

38,813

9,258

3,980,261

Debt securities issued

188

356

218,681

40,000

259,225

Derivatives

1,958

1,017

4,675

7,650

Lease liabilities

275

540

798

1,570

2,950

6,133

Discontinued operations

156,817

136

315

1,618

158,999

Other liabilities

43,746

3,800

1,933

5,329

34,001

9,248

98,057

Total liabilities

3,052,168

211,601

719,493

602,915

333,760

60,124

4,980,061

Equity

424,218

Total liabilities and equity

3,052,168

211,601

719,493

602,915

333,760

484,342

5,404,279

Net balance sheet position – long/ (short)

(2,261,257)

(42,122)

(193,156)

(117,344)

1,995,632

618,247

Off-balance sheet items

Contingent liabilities

50,407

Financial commitments

306,690

Liabilities and commitments are allocated to the earliest period in which the Group may be contractually required to settle the liabilities

or the customer may draw down undrawn loan commitments. Issued financial guarantee contracts are allocated to the earliest period

in which the guarantee could be called. Assets are allocated to the earliest period in which the Group may contractually require to

settle receivables.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 72

Financial liabilities by contractual undiscounted cash flows

Group as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

Over 1

year

Total

Carrying

amount

Financial liabilities designated at fair value

through profit or loss

233

1,916

1,899

21,197

25,279

25,240

Financial liabilities measured at amortised

cost*

2,849,475

206,893

712,378

600,653

357,736

4,727,135

4,690,115

Off-balance sheet items

Contingent liabilities

50,407

Financial commitments

306,690

* Includes Deposits from credit institutions and central banks, part of Deposits and borrowings from customers, Debt securities issued and Lease liabilities.

Undiscounted contractual cash flows for other liabilities equal their carrying value.

Assets, liabilities and off-balance sheet items by contractual maturity

Group as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over 5

years and

undated

Total

Assets

Cash and cash balances at central banks

331,083

39,942

371,025

Loans to credit institutions

36,759

21,983

58,742

Debt securities

22,052

143,055

29,816

83,809

1,095,724

427,264

1,801,720

Loans to public

94,118

131,991

142,953

300,034

1,395,216

637,197

2,701,509

Equity instruments

1,279

Other financial instruments

42,032

Derivatives

735

2,026

1,536

4,303

Other assets

26,268

514

211

1,979

2,741

42,238

73,951

Total assets

511,015

299,569

172,986

387,358

2,493,681

1,189,952

5,054,561

Liabilities

Deposits from credit institutions and central

banks

3,425

475,810

479,235

Deposits and borrowings from customers

3,535,407

58,558

30,108

128,875

51,452

9,463

3,813,863

Debt securities issued

258,895

Derivatives

477

207

739

Lease liabilities

258

506

737

1,461

4,652

7,614

Other liabilities

19,933

2,705

2,524

5,855

37,089

29,034

97,140

Total liabilities

3,559,500

61,976

33,424

136,191

569,003

297,392

4,657,486

Equity

397,075

Total liabilities and equity

3,559,500

61,976

33,424

136,191

569,003

694,467

5,054,561

Net balance sheet position – long/ (short)

(3,048,485)

237,593

139,562

251,167

1,924,678

495,485

Off-balance sheet items

Contingent liabilities

34,265

Financial commitments

387,943

Financial liabilities by contractual undiscounted cash flows

Group as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

Over 1

year

Total

Carrying

amount

Financial liabilities designated at fair value

through profit or loss

402

6,691

3,072

6,443

23,150

39,758

39,745

Financial liabilities measured at amortised

cost*

3,538,752

52,418

29,226

128,677

810,574

4,559,647

4,519,862

Off-balance sheet items

Contingent liabilities

34,265

Financial commitments

387,943

* Includes Deposits from credit institutions and central banks, part of Deposits and borrowings from customers, Debt securities issued and Lease liabilities.

Undiscounted contractual cash flows for other liabilities equal their carrying value.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 73

Assets, liabilities and off-balance sheet items by contractual maturity

Bank as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over 5

years and

undated

Total

Assets

Cash and cash balances at central banks

532,030

Loans to credit institutions

18,987

23,057

42,044

Debt securities

20,818

13,285

322,544

140,263

666,737

386,654

1,550,301

Loans to public

80,218

1,113,464

73,044

168,398

826,793

618,184

2,880,101

Equity instruments

1,029

Other financial instruments

1,101

Derivatives

960

325

1,285

Other assets

30,680

81,282

111,962

Total assets

683,693

1,150,131

395,588

308,661

1,493,530

1,088,250

5,119,853

Liabilities

Deposits from credit institutions and central

banks

4,399

430,000

39,000

473,399

Deposits and borrowings from customers

2,865,099

206,165

279,914

593,624

24,644

3,874

3,973,320

Debt securities issued

188

356

218,681

40,000

259,225

Derivatives

1,958

1,017

4,675

7,650

Lease liabilities

269

525

777

1,526

2,817

5,914

Other liabilities

22,303

4,837

27,140

Total liabilities

2,894,028

207,707

715,554

595,506

285,142

48,711

4,746,648

Equity

373,205

Total liabilities and equity

2,894,028

207,707

715,554

595,506

285,142

421,916

5,119,853

Net balance sheet position – long/ (short)

(2,210,335)

942,424

(319,966)

(286,845)

1,208,388

666,334

Off-balance sheet items

Contingent liabilities

60,936

Financial commitments

322,211

Liabilities and commitments are allocated to the earliest period in which the Group may be contractually required to settle the liabilities

or the customer may draw down undrawn loan commitments. Issued financial guarantee contracts are allocated to the earliest period

in which the guarantee could be called. Assets are allocated to the earliest period in which the Group may contractually require to

settle receivables.

Financial liabilities by contractual undiscounted cash flows

Bank as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

Over 1

year

Total

Carrying

amount

Financial liabilities measured at amortised

cost*

2,869,828

206,879

712,356

600,609

359,204

4,748,876

4,711,858

Off-balance sheet items

Contingent liabilities

60,936

Financial commitments

322,211

* Includes Deposits from credit institutions and central banks, Deposits and borrowings from customers, Debt securities issued and Lease liabilities.

Undiscounted contractual cash flows for other liabilities equal their carrying value.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 74

Assets, liabilities and off-balance sheet items by contractual maturity

Bank as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over 5

years and

undated

Total

Assets

Cash and cash balances at central banks

321,684

39,942

361,626

Loans to credit institutions

13,710

21,983

35,693

Debt securities

22,052

139,791

25,086

76,242

980,477

408,660

1,652,308

Loans to public

36,941

1,019,053

64,226

155,930

722,177

611,386

2,609,713

Equity instruments

1,279

Other financial instruments

7,400

Derivatives

735

2,026

1,536

4,303

Other assets

21,452

106,098

127,574

Total assets

416,574

1,182,854

89,319

233,725

1,702,659

1,174,765

4,799,896

Liabilities

Deposits from credit institutions and central

banks

14,919

1,943

6,956

475,810

499,628

Deposits and borrowings from customers

3,424,234

51,867

27,036

122,432

36,521

3,434

3,665,524

Debt securities issued

258,895

Derivatives

477

207

739

Lease liabilities

258

506

737

1,461

3,567

6,529

Other liabilities

2,218

20,800

23,018

Total liabilities

3,442,106

54,523

34,784

123,893

515,898

283,129

4,454,333

Equity

345,563

Total liabilities and equity

3,442,106

54,523

34,784

123,893

515,898

628,692

4,799,896

Net balance sheet position – long/ (short)

(3,025,532)

1,128,331

54,535

109,832

1,186,761

546,073

Off-balance sheet items

Contingent liabilities

38,863

Financial commitments

431,065

Financial liabilities by contractual undiscounted cash flows

Bank as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

Over 1

year

Total

Carrying

amount

Financial liabilities measured at amortised

cost*

3,439,447

54,325

36,097

128,506

811,986

4,470,361

4,430,576

Off-balance sheet items

Contingent liabilities

38,863

Financial commitments

431,065

* Includes Deposits from credit institutions and central banks, Deposits and borrowings from customers, Debt securities issued and Lease liabilities.

Undiscounted contractual cash flows for other liabilities equal their carrying value.

Change in lease liabilities

EUR thousands

2022

2021

2022

2021

Group

Bank

Opening balance

7,614

8,769

6,529

8,699

New lease liabilities recognised

2,854

2,740

2,839

1,399

Amortisation of existing lease liabilities and

derecognition

(3,749)

(3,895)

(3,454)

(3,569)

Transfer to discontinued operations

(586)

Implied interest expense calculated

Settlement of implied interest expense

(43)

(64)

(38)

(50)

Closing balance

6,133

7,614

5,914

6,529

Derivative liabilities settled on a net basis and contractual undiscounted cash flows arising from derivatives settled on a gross basis

Group as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over

5 years

Total

Derivatives settled on a net basis

Foreign exchange derivatives

(517)

(442)

(959)

Derivatives settled on a gross basis

Foreign exchange derivatives:

Outflow

(40,415)

(52,257)

(74,364)

(167,036)

Inflow

39,679

51,934

70,692

162,305

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 75

Group as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over

5 years

Total

Derivatives settled on a net basis

Foreign exchange derivatives

(86)

(66)

(150)

Derivatives settled on a gross basis

Foreign exchange derivatives:

Outflow

(38,959)

(127,753)

(1,433)

(47,133)

(215,278)

Inflow

39,303

129,651

1,380

48,770

219,104

Bank as of 31/12/2022, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over

5 years

Total

Derivatives settled on a net basis

Foreign exchange derivatives

(517)

(442)

(959)

Derivatives settled on a gross basis

Foreign exchange derivatives:

Outflow

(40,415)

(52,257)

(74,364)

(167,036)

Inflow

39,679

51,934

70,692

162,305

Bank as of 31/12/2021, EUR thousands

Within 1

month

2-3

months

4-6

months

7-12

months

2-5

years

Over

5 years

Total

Derivatives settled on a net basis

Foreign exchange derivatives

(86)

(66)

(150)

Derivatives settled on a gross basis

Foreign exchange derivatives:

Outflow

(38,959)

(127,753)

(1,433)

(47,133)

(215,278)

Inflow

39,303

129,651

1,380

48,770

219,104

Comparison of contractual undiscounted cash flows and carrying amount of derivatives

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Contractual undiscounted cash flows of derivatives

(5,690)

3,676

(5,690)

3,676

Carrying value of derivatives, net

(6,365)

3,564

(6,365)

3,564

Anti-money laundering, counter terrorism financing, counter proliferation financing and sanctions

compliance policy

The Group has adopted Money Laundering, Terrorism and Proliferation Financing (ML/TF/PF) Risk Management Strategy, Anti-

Money Laundering and Counter Terrorism and Proliferation Financing (AML/CTF/CPF) Policy and Sanctions Compliance Policy to

have an effective and comprehensive AML/CTF/CPF internal control system and to ensure compliance with sanctions imposed by

international organizations and national authorities. The Group regularly reviews its AML/CTF/CPF and Sanctions Compliance policies

and procedures with an aim to strengthen them and to update in line with changes in regulatory requirements and considering

international best practice. Internal control system of AML/CTF/CPF and Sanctions Compliance of the Group is regularly reviewed by

independent external and internal experts to ensure that the Group complies with applicable AML/CTF/CPF and Sanctions

Compliance requirements. The experts where appropriate provide recommendations on how to strengthen and improve

AML/CTF/CPF and Sanctions Compliance internal control system. The recommendations are diligently evaluated and implemented

by the Group.

The Group performs enterprise-wide ML/TF/PF and Sanctions Risk Assessment on a regular basis to evaluate ML/TF/PF and

Sanctions risks of the Group. The risk assessment includes identification and assessment of inherent ML/TF/PF and Sanctions risks

and effectiveness assessment of the existing AML/CTF/CPF and Sanctions compliance controls.

The Group has a dedicated Group’s Chief Compliance Officer (Member of the Management Board responsible for compliance), Money

Laundering Reporting Officer, Sanctions Officer and a special team with a duty of overseeing the Group policies, procedures and

processes implemented to preventing ML/TF/PF and sanctions violations.

Know Your Customer standards, including customer risk scoring, customer due diligence and enhanced due diligence practices, on-

going customer transactions monitoring, effective international and national sanctions screening is the priority of the Group. A sound

risk culture across the Group and risk aware employees, besides implemented industry’s best practice processes and systems, is the

backbone of ML/TF/PF and Sanctions risk management. Employees of the Group have a good knowledge of customers and their

counterparties and has a full understanding of the substance of transactions, thus can timely detect suspicious customer activity.

Under the Sanctions Compliance policy, it is strictly forbidden to knowingly and intentionally participate in activities whose purpose or

effect is to evade the restrictions imposed by the international and national sanctions, thus preventing the Group from been used to

circumvent the sanctions. The Group enforces sanctions established by the United Nations Security Council, the European Union

against specific countries and persons, national sanctions and the Office of Foreign Assets Control (OFAC) of the US Department of

the Treasury. The Group complies with OFAC sanctions in USD and all other currencies.

The Group has established AML/CTF/CPF and Sanctions Compliance training program for all its employees. The training program

consists of three main parts: initial, regular and extraordinary employee training and is tailored to the necessary knowledge level of

each function. For employees directly responsible for AML/CTF/CPF and Sanctions Compliance, special advanced trainings,

workshops and conferences are arranged to enhance their knowledge and skills necessary for execution of their tasks. The Group

supports and requires international certification in the AML/CTF/CPF and Sanctions Compliance fields for at least the leading

specialists involved in the ML/TF/PF and Sanctions risk management function (e.g., CAMS or ICA-certification).

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 76

In 2022 Lithuanian branch of the Bank had an AML and sanctions compliance audit by Bank of Lithuania. The fieldwork of the

regulatory audit has been completed; final findings report is being awaited as of publishing these financial statements.

Capital management

Capital adequacy is calculated in accordance with the current global standards of the bank capital adequacy (the Basel III international

regulatory framework) as implemented by the European Union via a regulation (EU) 575/2013 and a directive 2013/36/EU, rules and

recommendations issued by supervisory authorities and other relevant regulations.

Capital adequacy is a measure of sufficiency of the Group’s eligible capital resources to cover credit risks, market risks, operational

risk and other specific risks arising predominantly from asset and off-balance sheet exposures of the Group. The regulations require

credit institutions to maintain a Total Capital adequacy ratio of 8.0% of the total risk weighted exposure amounts. The rules also

require 4.5% minimum Common Equity Tier 1 capital ratio and 6.0% minimum Tier 1 capital ratio.

Total SREP capital requirement (TSCR) requires capital to cover risks in addition to these covered by the regulation (EU) 575/2013.

TSCR is established in a supervisory review and evaluation process (SREP) carried out by the supervisory authority. The supervisory

authority determines TSCR on a risk-by-risk basis, using supervisory judgement, the outcome of supervisory benchmarking, ICAAP

calculations and other relevant inputs. The additional pillar 2 capital requirement is re-assessed annually by the supervisory authority.

As of the period end based on the assessment of the supervisory authority an additional 2.50% own funds requirement is determined

to cover Pillar 2 risks. Thus, as of the period end Citadele shall at all times meet, on a consolidated basis, a total SREP capital

requirement (TSCR) of 10.5% (which includes a Pillar 2 additional own funds requirement of 2.5% to be held in the form of 56.25% of

Common Equity Tier 1 (CET1) capital and 75% of Tier 1 capital, as a minimum).

On top of the minimum capital adequacy ratios and the Pillar 2 additional capital requirements (TSCR), the Group and the Bank must

comply with the capital buffer requirements. The buffer requirements must be reached by Common Equity Tier 1 capital. The capital

conservation buffer both for the Group and the Bank is set at 2.50%, limiting dividend pay-out and certain other Tier 1 equity instrument

buybacks, if the buffer threshold is not exceeded.

Citadele, being identified as “other systemically important institution” (O-SII), as of period end must also comply with the O-SII capital

buffer requirement set by the supervisory authority at 1.50%. From 1 January 2023 O-SII applicable to Citadele is set to increase to

1.75%.

Countercyclical capital buffer norms at each balance sheet date are calculated based on the actual risk exposure geographical

distribution and the countercyclical buffer rates applicable for each geographical location. In reaction to the Covid-19 events most

European countercyclical capital buffer requirements were decreased to 0%. Therefore, based on the regional distribution of the

Group’s exposures the effective countercyclical capital buffer requirement of the Group had decreased to almost 0%. Since then,

some countries have announced planed future increases in countercyclical capital buffer levels which, after prespecified delay, one-

by-one will start to become effective.

The Pillar 2 Guidance (P2G) is a bank-specific recommendation that indicates the level of capital that the supervisory authority expects

banks to maintain in addition to their binding capital requirements. It serves as a buffer for banks to withstand stress. The Pillar 2

Guidance is determined as part of the Supervisory Review and Evaluation Process (SREP) and for Citadele as of period end is set at

1.5%. Unlike the Pillar 2 Requirement, the Pillar 2 Guidance is not legally binding.

The Group and the Bank applies requirements of minimum loss coverage for non-performing exposures in line with regulation (EU)

2019/630. The minimum loss coverage calculation is mathematically simplistic “calendar based” calculation for non-performing

exposures, which is constructed on the principle – the longer an exposure has been non-performing, the lower the probability for the

recovery of its value. Therefore, the portion of the exposure that should be covered by provisions, impairments, other adjustments or

deductions should increase with time, following a pre-defined calendar. Insufficient coverage for non-performing exposures is

deductible from the regulatory capital. Due to the Group’s provisioning policy and portfolio structure, the regulation of minimum loss

coverage for non-performing exposures has had minor impact on the Group’s capital adequacy position.

The Bank has to comply with the regulatory requirements both at the Bank’s standalone level and at the Group’s consolidated level.

As of the period end both the Bank and the Group have sufficient capital to comply with the capital adequacy requirements. The long-

term regulatory capital position of the Group and the Bank is planned and managed in line with these and other expected upcoming

regulatory requirements.

Regulatory capital requirements of the Group on 31 December 2022

Common

equity Tier 1

capital ratio

Tier 1

capital ratio

Total capital

adequacy

ratio

Common equity Tier 1 ratio

4.50%

Additional Tier 1 ratio

1.50%

Additional total capital ratio

2.00%

Pillar 2 additional own funds requirement

(individually determined by the

supervisory authority in the SREP, P2R)

1.41%

1.88%

2.50%

Capital buffer requirements:

Capital conservation buffer

2.50%

O-SII capital buffer

1.50%

Systemic risk buffer

0.06%

Countercyclical capital buffer

0.15%

Capital requirement

10.12%

12.09%

14.71%

Pillar 2 Guidance (P2G)

1.50%

Non-legally binding capital requirement

with Pillar 2 Guidance

11.62%

13.59%

16.21%

As of the period end capital and capital buffer requirements for the Bank and the Group, except for the Systemic risk buffer at 0.09%

and Countercyclical capital buffer at 0.12%, are the same.

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 77

Capital adequacy ratio (including net result for the period)

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Common equity Tier 1 capital

Paid up capital instruments and share premium

157,702

157,127

157,702

157,127

Retained earnings

273,080

230,786

228,898

186,548

Regulatory deductions

(26,588)

(8,255)

(23,669)

(6,290)

Other capital components and transitional adjustments, net

4,364

9,634

1,528

5,173

Tier 2 capital

Eligible part of subordinated liabilities

59,595

60,000

59,595

60,000

Total own funds

468,153

449,292

424,054

402,558

Risk weighted exposure amounts for credit risk, counterparty

credit risk and dilution risk

2,080,113

2,164,268

1,404,459

2,174,244

Total exposure amounts for position, foreign currency open

position and commodities risk

9,944

10,916

9,494

10,916

Total exposure amounts for operational risk

237,799

206,624

191,884

162,314

Total exposure amounts for credit valuation adjustment

1,570

4,592

1,508

4,592

Total risk exposure amount

2,329,426

2,386,400

1,607,345

2,352,066

Common equity Tier 1 capital ratio

17.5%

16.3%

22.7%

14.6%

Total capital adequacy ratio

20.1%

18.8%

26.4%

17.1%

The consolidated Group for regulatory purposes is different from the consolidated Group for accounting purposes. As per regulatory

requirements AAS CBL Life, a licensed insurer, is not included in the consolidated Group for capital adequacy purposes.

Consequently, it is excluded from own funds calculation and individual assets of AAS CBL Life are not included as risk exposures in

the Group’s capital adequacy calculation. Instead, the carrying value of the Group’s investment in AAS CBL Life constitutes a risk

exposure in the Group’s capital adequacy ratio calculation.

Total risk exposure amount of the Bank has decreased substantially in 2022 as a result of receiving approval of the supervisory

authority to apply 0% risk weight to certain exposures with subsidiaries.

Transitional adjustments applied as of 31 December 2022

Capital adequacy calculation in accordance with the EU and the FCMC regulations permits transitional adjustments. The regulatory

compliance is measured based on the transitional capital adequacy ratio. For transparency purposes the fully loaded capital adequacy

ratio (i.e., excluding transitional adjustments) is also disclosed. The expectation is that from 2023 the transitional capital adequacy

ratio will converge with the fully loaded capital adequacy ratio, as the transitional provisions expire at the end of 2022.

Transitional provisions, if applied, allow for a favourable treatment of specific capital components or risk exposure items, resulting in

a marginal improvement in the capital adequacy ratios. Application of the transitional provisions is mostly discretionary. An application

decision is evaluated in the context of estimated positive impact on the capital adequacy ratio versus the resources required to develop

the systems and the processes to implement each transitional provision.

The transitional provisions that the Group and the Bank has applied for the period end capital adequacy calculations:

The regulation (EU) 2017/2395 which permits specific proportion of the IFRS 9 implementation impact to be amortised over a five-

year period (starting from 2018) for capital adequacy calculation purposes.

All other transitional provisions for which the Group and the Bank is eligible are not applied as of the period end and are still in the

assessment phase, implementation phase or have been decided not to be implemented.

Fully loaded capital adequacy ratio (i.e., excluding transitional adjustments, including net result for the period)

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Common equity Tier 1 capital, fully loaded

407,095

386,366

362,932

339,503

Tier 2 capital

59,595

60,000

59,595

60,000

Total own funds, fully loaded

466,690

446,366

422,527

399,503

Total risk exposure amount, fully loaded

2,328,275

2,383,981

1,606,107

2,349,379

Common equity Tier 1 capital ratio, fully loaded

17.5%

16.2%

22.6%

14.5%

Total capital adequacy ratio, fully loaded

20.0%

18.7%

26.3%

17.0%

Leverage ratio – fully loaded and transitional (including net result for the period)

Leverage ratio is calculated as Tier 1 capital versus the total exposure measure. The minimum requirement is 3%. The exposure

measure includes both non-risk based on-balance sheet and off-balance sheet items calculated in accordance with the capital

requirements regulation. The leverage ratio and the risk-based capital adequacy ratio requirements are complementary, with the

leverage ratio defining the minimum capital to total exposure requirement and the risk-based capital adequacy ratios limiting bank

risk-taking.

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Leverage Ratio – fully phased-in definition of Tier 1 capital

7.5%

7.0%

6.9%

Leverage Ratio – transitional definition of Tier 1 capital

7.5%

7.6%

7.0%

6.9%

AS Citadele banka

Financial statements | Notes

AS Citadele banka Annual report for the year ended 31 December 2022 78

Minimum requirement for own funds and eligible liabilities (MREL) under BRRD

The European Commission has adopted the regulatory technical standards (RTS) on the criteria for determining the minimum

requirement for own funds and eligible liabilities (MREL) under the Banking Package (CRR2/CRD5/BRRD2/SRMR2). In order to

ensure the effectiveness of bail-in and other resolution tools introduced by BRRD 2, it requires that all institutions must meet an

individual MREL requirement. The MREL requirement for each institution is comprised of several elements, including the required

loss absorbing capacity of the institution, and the level of recapitalisation needed to implement the preferred resolution strategy

identified during the resolution planning process. Items eligible for inclusion in MREL include institution's own funds (within the

meaning of the capital requirements directive), along with eligible liabilities subject to conditions set in regulation 2019/876.

MREL is required to be calculated based on both total risk exposure amount (TREA) and leverage ratio exposure (LRE) amount.

Statutory subordination requirements are be set depending on the Group’s classification and are communicated individually in a MREL

decision.

SRB has determined the consolidated intermediate MREL target for Citadele Group at the level of 18.03% of TREA or 5.18% of LRE,

whichever is higher, to be met by 1 January 2022 and the updated calibrated MREL target to be met by 1 January 2024 at the level

of 23.70% of TREA or 5.91% of LRE, whichever is higher. After the transition period the Group shall comply with MREL at all times

on the basis of evolving amounts of TREA/LRE. As of period end, the Group is in compliance with both TREA and LRE based

intermediate MREL requirements.

The MREL targets were determined by the SRB using the financial and supervisory information as of 31 December 2021 and is

expected to be updated by the SRB annually based on more recent financial information of the Group.

Operational risk

The Group has adopted the Basel Committee on Banking Supervision’s definition of operational risk: the probability of incurring losses

due to failure or partial failure of internal processes to comply with the requirements of the laws and binding external regulations, as

well as the requirements of internal regulations, due to the acts of the Group’s employees and operation of systems, irregularities in

internal processes, as well as due to the acts of third parties or other external conditions. Operational risk is divided into the following

categories: personnel risk, process risk, IT and system risk, external risk.

Operational risk is managed using an integrated and comprehensive framework of policies, methodologies, procedures and

regulations for identification, analysis, mitigation, control, and reporting of operational risk. The Group’s operational risk management

processes are integral to all business activities and are applicable to all employees and members of the Group. The Group’s aim is to

ensure that each of its employees knows not just how to perform specific transactions, but also understand the key areas where risk

can arise and the processes and steps required to prevent, or otherwise mitigate such risk.

The goal of the Group’s operational risk management framework is to maintain low level of risk while ensuring that any residual risk

is economically justified in light of the need to sustain the Group’s performance and profit in the long term.

The Group aims to avoid operational risks with a potential impact which exceeds 1 bp of CET1 capital and has a higher probability of

occurrence than once per five years, or risks with unquantifiable impact which are unmanageable, irrespective of the financial gains

this could bring. Each accepted risk must be economically justified and, in cases where the assessment of operational risk in monetary

terms is possible, the costs of the control measures required must be commensurate with the eventual loss that could be prevented

by the existence of the control system.

The Group applies following approaches for operational risk management:

▪ Assessing operational risk in development projects: new and updated services and products are introduced only after a

thorough risk assessment has been carried out;

▪ Conducting regular operational risk-control self-assessment: the Group identifies and assesses potential operational risk

events, assesses control systems which are in place, and analyses the necessary risk reduction measures;

▪ Measuring operational risk indicators: the Group uses statistical, financial, and other indicators which represent the levels of

operational risk in its various activities;

▪ Measuring, analysing, monitoring, reporting and escalating operational risk: the Group registers and analyses operational risk

events, including their severity, causes and other important information in an operational risk loss and incident database;

▪ Conducting scenario and sensitivity analysis and stress-testing;

▪ Performing business continuity planning: the Group performs regular business impact analysis and has implemented a

Disaster Recovery Plan;

▪ Assigning responsibilities: the operational risk management system includes assignment of responsibilities to certain

individuals; and

▪ Documenting decisions: the Group maintains records in relation to the process undertaken to reach a particular decision or to

prevent or mitigate a particular risk.

Operational risk management in the Group is carried out in accordance with Operational Risk Management Policy.

NOTE 36. EVENTS AFTER THE REPORTING DATE

Partial repayment of TLTRO-III borrowing

In January 2023 EUR 100 million and in February 2023 EUR 80 million of the TLTRO-III borrowing outstaying was repaid before

maturity.

Share capital increase of Swiss subsidiary

In February 2023 the management of the Bank has decided to increase share capital of Swiss subsidiary Kaleido Privatbank AG by

CHF 5.0 million. The capital increase is expected to strengthen capital position of the subsidiary. The subsidiary is classified as

discontinued operations held for sale.

AUDITORS REPORT

Auditors report, page 1

Auditors report, page 2

Auditors report, page 3

Auditors report, page 4

Auditors report, page 5

Auditors report, page 6

Auditors report, page 7

Auditors report, page 8

Auditors report, page 9

AS Citadele banka

Other regulatory disclosures

AS Citadele banka Annual report for the year ended 31 December 2022 88

OTHER REGULATORY DISCLOSURES

Besides financial, corporate governance and other disclosures included in this interim report of AS Citadele banka, the Financial and

Capital Market Commission’s regulation No. 231 "Regulation on Preparation of Public Quarterly Reports of Credit institutions" requires

several additional disclosures which are presented in this note.

Income Statement, regulatory format

EUR thousands

2022

2021

2022

2021

Group

Restated

discontinued

operations

Bank

Interest income

137,456

122,638

115,716

93,458

Interest expense

(18,607)

(15,659)

(18,489)

(14,994)

Dividend income

8,713

Commission and fee income

66,028

57,984

60,381

49,720

Commission and fee expense

(28,382)

(23,846)

(27,918)

(23,397)

Gain or loss on derecognition of financial assets and

liabilities not measured at fair value through profit or loss,

net

(1,492)

412

(1,492)

412

Gain or loss on financial assets and liabilities measured at

fair value through profit or loss, net

(824)

443

783

381

Fair value change in the hedge accounting

Gain or loss from foreign exchange trading and revaluation of

open positions

9,583

6,864

9,496

6,821

10.

Gain or loss on derecognition of non-financial assets, net

11.

Other income

9,837

7,583

3,043

4,816

12.

Other expense

(6,700)

(5,799)

(4,402)

(3,076)

13.

Administrative expense

(82,846)

(76,020)

(70,465)

(64,660)

14.

Amortisation and depreciation charge *

(8,729)

(8,120)

(8,309)

(7,616)

15.

Gain or loss on modifications in financial asset contractual

cash flows

1,336

(932)

1,336

(932)

16.

Provisions, net

(1,049)

(1,657)

(954)

(1,747)

17.

Impairment charge and reversals, net

(22,723)

(25,015)

(9,054)

18.

Negative goodwill recognised in profit or loss

19.

Share of the profit or loss of investments in subsidiaries, joint

ventures and associates accounted for using the equity

method

(89)

20.

Profit or loss from non-current assets and disposal groups

classified as held for sale

(4,205)

(7,365)

286

(213)

21.

Profit before taxation

48,623

56,610

42,621

29,961

22.

Corporate income tax

(2,318)

(1,565)

(438)

(318)

23.

Net profit / loss for the period

46,305

55,045

42,183

29,643

24.

Other comprehensive income for the period

(20,687)

(3,372)

(16,067)

(2,770)

* Group’s depreciation charges for assets under operating lease contracts are presented within other operating expense as use of

assets is core business of the Group. These expenses are part of operating income.

Balance Sheet, regulatory format

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Cash and demand balances with central banks

532,030

371,025

532,030

361,626

Demand deposits due from credit institutions

25,382

36,743

18,985

13,710

Financial assets designated at fair value through profit or loss

30,687

47,410

3,315

12,778

3.1.

Including loans to public and credit institutions

Financial assets at fair value through other comprehensive

income

222,623

340,905

180,321

233,370

Financial assets at amortised cost

4,359,617

4,184,527

4,273,240

4,050,838

5.1.

Including loans to public and credit institutions

2,989,537

2,723,508

2,903,160

2,631,696

Derivatives – hedge accounting

Change in the fair value of the portfolio hedged against

interest rate risk

Investments in subsidiaries, joint ventures and associates

190

279

47,770

77,087

Tangible assets

15,730

20,444

10,321

11,496

10.

Intangible assets

8,162

8,562

6,069

6,083

11.

Tax assets

4,300

4,603

3,295

3,050

12.

Other assets

39,530

39,117

30,680

28,912

13.

Non-current assets and disposal groups classified as held for

sale

166,028

946

13,827

946

14.

Total assets (1.+....+13.)

5,404,279

5,054,561

5,119,853

4,799,896

15.

Due to central banks

463,802

475,816

463,803

475,816

16.

Demand liabilities to credit institutions

5,934

3,419

6,014

11,664

17.

Financial liabilities designated at fair value through profit or

loss

32,890

40,485

7,650

739

17.1

Including deposits from customers and credit institutions

20,890

39,745

18.

Financial liabilities measured at amortised cost

4,214,246

4,033,012

4,236,127

3,936,567

18.1

Including deposits from customers and credit institutions

3,955,021

3,774,117

3,976,902

3,677,672

19.

Derivatives – hedge accounting

20.

Change in the fair value of the portfolio hedged against

interest rate risk

21.

Provisions

4,920

3,934

4,838

3,882

22.

Tax liabilities

1,579

573

189

23.

Other liabilities

97,691

100,247

28,183

25,476

AS Citadele banka

Other regulatory disclosures

AS Citadele banka Annual report for the year ended 31 December 2022 89

24.

Liabilities included in disposal groups classified as held for

sale

158,999

25.

Total liabilities (15.+...+24.)

4,980,061

4,657,486

4,746,648

4,454,333

26.

Shareholders’ equity

424,218

397,075

373,205

345,563

27.

Total liabilities and shareholders’ equity (25.+26.)

5,404,279

5,054,561

5,119,853

4,799,896

28.

Memorandum items

357,097

422,208

383,147

469,928

29.

Contingent liabilities

50,407

34,265

60,936

38,863

30.

Financial commitments

306,690

387,943

322,211

431,065

ROE and ROA ratios

2022

2021

2022

2021

Group

Bank

Return on equity (ROE) (%)

11.28%

14.85%

11.74%

8.94%

Return on assets (ROA) (%)

0.89%

1.14%

0.85%

0.65%

Average value is calculated as the arithmetic mean of the balance sheet assets or residual capital and reserves at the beginning of the reporting period

and at the end of the reporting period.

Capital adequacy ratio

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

Own funds (1.1.+1.2.)

468,153

449,292

424,054

402,558

1.1

Tier 1 capital (1.1.1.+1.1.2.)

408,558

389,292

364,459

342,558

1.1.1

Common equity Tier 1 capital

408,558

389,292

364,459

342,558

1.1.2

Additional Tier 1 capital

1.2

Tier 2 capital

59,595

60,000

59,595

60,000

Total risk exposure amount

(2.1.+2.2.+2.3.+2.4.+2.5.+2.6.+2.7.)

2,329,426

2,386,400

1,607,345

2,352,066

2.1

Risk weighted exposure amounts for credit, counterparty credit

and dilution risks and free deliveries

2,080,113

2,164,268

1,404,459

2,174,244

2.2

Total risk exposure amount for settlement/delivery

2.3

Total risk exposure amount for position, foreign exchange and

commodities risks

9,944

10,916

9,494

10,916

2.4

Total risk exposure amount for operational risk

237,799

206,624

191,884

162,314

2.5

Total risk exposure amount for credit valuation adjustment

1,570

4,592

1,508

4,592

2.6

Total risk exposure amount related to large exposures in the

trading book

2.7

Other risk exposure amounts

Capital adequacy ratios

3.1

Common equity Tier 1 capital ratio (1.1.1./2.*100)

17.5%

16.3%

22.7%

14.6%

3.2

Surplus (+)/ deficit (-) of Common equity Tier 1 capital (1.1.1.-

2.*4.5%)

303,734

281,904

292,129

236,715

3.3

Tier 1 capital ratio (1.1./2.*100)

17.5%

16.3%

22.7%

14.6%

3.4

Surplus (+)/ Deficit (-) of Tier 1 capital (1.1.-2.*6%)

268,793

246,108

268,019

201,434

3.5

Total capital ratio (1./2.*100)

20.1%

18.8%

26.4%

17.1%

3.6

Surplus (+)/ Deficit (-) of total capital (1.-2.*8%)

281,799

258,380

295,467

214,393

Combined buffer requirements (4.1.+4.2.+4.3.+4.4.+4.5.)

98,144

95,456

67,696

94,083

4.1

Capital conservation buffer

58,236

59,660

40,184

58,802

4.2

Conservation buffer for macroprudential or systemic risk at

member state’s level

4.3

Institution specific countercyclical buffer

3,494

1,929

4.4

Systemic risk buffer

1,473

4.5

Other systemically important institution buffer

34,941

35,796

24,110

35,281

Capital adequacy ratios, including adjustments

5.1

Impairment or asset value adjustments for capital adequacy

ratio purposes

5.2

Common equity tier 1 capital ratio including line 5.1

adjustments

17.5%

16.3%

22.7%

14.6%

5.3

Tier 1 capital ratio including line 5.1 adjustments

17.5%

16.3%

22.7%

14.6%

5.4

Total capital ratio including line 5.1 adjustments

20.1%

18.8%

26.4%

17.1%

Capital adequacy ratios here are calculated in accordance with the Basel III regulation as implemented via EU regulation 575/2013, directive 2013/36/EU

and relevant FCMC regulations. In the disclosure above, in the Group’s and the Bank’s regulatory capital, audited profits and any losses accumulated

up to the reporting date are included.

AS Citadele banka

Other regulatory disclosures

AS Citadele banka Annual report for the year ended 31 December 2022 90

EUR thousands

31/12/2022

31/12/2021

31/12/2022

31/12/2021

Group

Bank

1.A

Own funds, IFRS 9 transitional provisions not applied

466,690

446,366

422,527

399,503

1.1.A

Tier 1 capital, IFRS 9 transitional provisions not applied

407,095

386,366

362,932

339,503

1.1.1.

Common equity Tier 1 capital, IFRS 9 transitional

provisions not applied

407,095

386,366

362,932

339,503

2.A

Total risk exposure amount, IFRS 9 transitional provisions

not applied

2,328,275

2,383,981

1,606,107

2,349,379

3.1.A

Common equity Tier 1 capital ratio, IFRS 9 transitional

provisions not applied

17.5%

16.2%

22.6%

14.5%

3.3.A

Tier 1 capital ratio, IFRS 9 transitional provisions not applied

17.5%

16.2%

22.6%

14.5%

3.5.A

Total capital ratio, IFRS 9 transitional provisions not applied

20.0%

18.7%

26.3%

17.0%

Business Strategy and Objectives

Information about Citadele’s strategy and objectives is available in the “Values and strategy” section of the Bank’s web page.

Branches

AS Citadele banka has 15 branches and client service centres in Latvia, 1 branch in Estonia and 1 branch in Lithuania as of the period end. AS Citadele

banka has no client consultation centres in Latvia. The Lithuanian branch has 6 customer service units in Lithuania. Information about branches, client

service centres and ATMs of Citadele is available in the Citadele web page's section “Branches and ATMs”.

Bank’s Organizational Structure

Supervisory Board

Chief Executive Officer (MB)

Internal Audit

Chief Corporate Commercial

Officer (MB)

Corporate Business

Transaction Banking

Loan Recovery

Baltic Leasing

Corporate Financial Markets

Corporate Internal Risk Control

Chief Retail Commercial

Officer (MB)

Baltic Mortgage

Baltic Competence Center

Baltic SME

Baltic Sales & Customer Service

Baltic Customer Excellence Center

Baltic Private Banking

Chief Technology &

Operations Officer (MB)

IT Technology

IT Security

Project Management

Data Architecture & Delivery

Operations

Chief Risk

Officer (MB)

Risk management

Chief Strategy

Officer (MB)

Business Development

Data Science & AI

Digital Ventures

Chief Compliance

Officer (MB)

Compliance

Chief Financial

Officer (MB)

Finance

Financial Institutions

Legal

Financial markets

Treasury

MB Secretariat

Human Resources

Marketing & Communications

Transformation Office

Investors Relations & ESG

AS Citadele banka

Quarterly Financials of the Group

AS Citadele banka Annual report for the year ended 31 December 2022 91

QUARTERLY STATEMENTS OF INCOME AND BALANCE SHEETS OF THE GROUP

Group, EUR thousands (Restated discontinued operations)

Q4 2022

Q3 2022

Q2 2022

Q1 2022

Q4 2021

Interest income

41,145

33,092

31,621

31,598

31,506

Interest expense

(5,209)

(4,148)

(5,042)

(4,208)

(4,448)

Net interest income

35,936

28,944

26,579

27,390

27,058

Fee and commission income

15,420

16,882

18,267

15,459

15,950

Fee and commission expense

(8,121)

(7,944)

(7,160)

(5,157)

(6,941)

Net fee and commission income

7,299

8,938

11,107

10,302

9,009

Net financial income

3,413

3,240

1,747

203

268

Net other income / (expense)

(237)

999

831

1,484

867

Operating income

46,411

42,121

40,264

39,379

37,202

Staff costs

(13,614)

(14,792)

(16,007)

(14,458)

(13,885)

Other operating expenses

(8,148)

(5,675)

(5,841)

(4,311)

(7,116)

Depreciation and amortisation

(2,260)

(2,227)

(2,169)

(2,073)

(2,040)

Operating expense

(24,022)

(22,694)

(24,017)

(20,842)

(23,041)

Profit before impairment

22,389

19,427

16,247

18,537

14,161

Net credit losses

(8,775)

(2,242)

(6,631)

(6,056)

(1,430)

Other impairment losses

(22)

(16)

(51)

(56)

Operating profit from continuous operations

13,635

17,163

9,600

12,430

12,675

Result from non-current assets held for sale and

discontinued operations

(272)

(2,109)

(1,228)

(596)

(2,095)

Operating profit

13,363

15,054

8,372

11,834

10,580

Income tax

(1,228)

(470)

(347)

(273)

(274)

Net profit

12,135

14,584

8,025

11,561

10,306

Group, EUR thousands

31/12/2022

30/09/2022

30/06/2022

31/03/2022

31/12/2021

Assets

Cash and cash balances at central banks

532,030

239,448

215,770

340,992

371,025

Loans to credit institutions

48,441

47,642

42,112

53,341

58,742

Debt securities

1,592,603

1,620,429

1,660,153

1,639,206

1,801,720

Loans to public

2,966,478

2,996,291

2,895,490

2,772,321

2,701,509

Equity instruments

1,029

1,086

1,892

1,329

1,279

Other financial instruments

28,473

28,618

29,490

32,235

42,032

Derivatives

1,285

5,937

8,701

4,852

4,303

Investments in related entities

190

182

279

Tangible assets

15,730

16,911

18,638

20,090

20,444

Intangible assets

8,162

7,942

7,891

7,931

8,562

Current income tax assets

1,822

2,142

2,075

1,927

Deferred income tax assets

2,478

2,496

2,548

2,624

2,676

Discontinued operations and non-current assets

held for sale

166,028

149,422

137,212

149,365

946

Other assets

39,530

38,003

39,577

34,417

39,117

Total assets

5,404,279

5,156,549

5,061,798

5,061,057

5,054,561

Liabilities

Deposits from credit institutions and central banks

469,736

475,987

479,163

476,783

479,235

Deposits and borrowings from customers

3,980,261

3,764,541

3,682,557

3,676,082

3,813,863

Debt securities issued

259,225

262,342

260,662

260,545

258,895

Derivatives

7,650

1,222

2,181

1,648

739

Provisions

4,920

4,880

4,704

3,893

3,934

Current income tax liabilities

1,204

200

197

Deferred income tax liabilities

375

376

Discontinued operations

158,999

137,363

134,227

139,794

Other liabilities

97,691

97,967

95,786

101,804

100,247

Total liabilities

4,980,061

4,744,680

4,659,658

4,661,124

4,657,486

Equity

Share capital

157,258

156,888

Reserves and other capital components

(12,378)

(12,593)

(7,368)

(1,486)

7,320

Retained earnings

279,338

267,204

252,620

244,531

232,867

Total equity

424,218

411,869

402,140

399,933

397,075

Total liabilities and equity

5,404,279

5,156,549

5,061,798

5,061,057

5,054,561

Off-balance sheet items

Guarantees and letters of credit

50,407

48,844

33,554

24,170

34,265

Financial commitments

306,690

323,125

363,616

382,520

387,943

AS Citadele banka

Definitions and abbreviations

AS Citadele banka Annual report for the year ended 31 December 2022 92

DEFINITIONS AND ABBREVIATIONS

ALCO – Assets and Liabilities Management Committee.

AML – anti-money laundering.

BRRD – the bank recovery and resolution directive.

CIR – cost to income ratio. "Operating expense" divided by “Operating income”.

COR – cost of risk ratio. “Net credit losses” divided by the average of gross loans at the beginning and the end of the period.

CTF – combating terrorist financing.

ECB - European Central Bank.

EU – the European Union.

FCMC – Financial and Capital Markets Commission.

FMCRC – Financial Market and Counterparty Risk Committee.

GIC – Group’s Investment Committee.

IAS – International accounting standards.

ICAAP – internal capital adequacy assessment process.

IFRS – International financial reporting standards.

LCR – liquidity coverage ratio.

Loan-to-deposit ratio. Carrying value of “Loans to public” divided by “Deposits and borrowings from customers” at the end of the

relevant period.

ML/TF – money laundering and terrorism financing.

MREL – minimum requirement for own funds and eligible liabilities.

NSFR – net stable funding ratio.

OFAC – Office of Foreign Assets Control of the US Department of the Treasury.

O-SII – other systemically important institution.

ROA – return on average assets. Annualised net profit for the relevant period divided by the average of opening and closing balances

for the period.

ROE – return on average equity. Annualised net profit for the relevant period divided by the average of opening and closing total

equity for the period.

RTS – regulatory technical standards.

SRB – the Single Resolution Board.

SREP – supervisory review and evaluation process.

Stage 1 financial instruments – exposures without significant increase in credit risk since initial recognition.

Stage 2 financial instruments – exposures with significant increase in credit risk since initial recognition but not credit-impaired.

Stage 3 financial instruments – Credit-impaired exposures.

Stage 3 impairment ratio – impairment allowance for stage 3 exposures divided by gross loans to public classified as stage 3.

Stage 3 loans to public ratio – stage 3 loans to public divided by total loans to public as of the end of the relevant period.

TLOF – total liabilities and own funds.

TLTRO – ECB's targeted longer-term refinancing operations

TSCR – SREP capital requirement.