Note 1

Accounting principles

General

The Group`s interim accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), implemented by the EU as at 31 March 2015. The interim report has been prepared in compliance with IAS 34 Interim Reporting.

 

The accounts are presented in Norwegian kroner (NOK), which is also the Parent Bank`s and subsidiaries` functional currency.

 

The interim report is prepared in accordance with accounting principles and methods applied in the 2014 financial statements. There have been no changes or new standards coming into force in 2015.

 

Please see the Annual report 2014 for further description of accounting principles.

 

Note 2

Loans and deposits broken down according to sectors

GROUPLoans
Broken down according to sectors31.03.201531.03.201431.12.2014
Agriculture and forestry427472463
Fisheries3 2972 9603 279
Manufacturing2 3431 7662 217
Building and construction660685603
Wholesale and retail trade, hotels626632577
Foreign shipping/supply1 5141 1201 610
Property management6 2515 6915 637
Professional/financial services985719787
Transport and private/public services1 3781 2231 311
Public entities445238
Activities abroad127131135
Miscellaneous186115160
Total corporate/public entities17 83815 56616 817
Retail customers32 80630 70432 245
Accrued interest income125112129
Total loans50 76946 38249 191
Individual impairment-139-170-141
Collective impairment-176-140-166
Loans to and receivables from customers50 45446 07248 884
Loans with floating interest rate (amortised cost)45 78041 87245 250
Loans with fixed interest rate (fair value)4 6744 2003 941
    
    
GROUPDeposits
Broken down according to sectors31.03.201531.03.201431.12.2014
Agriculture and forestry182173163
Fisheries429347457
Manufacturing1 0571 2551 138
Building and construction450583484
Wholesale and retail trade, hotels658600688
Foreign shipping/supply584673311
Property management1 5931 4491 597
Professional/financial services1 3721 7671 370
Transport and private/public services1 5861 8652 009
Public entities755826697
Activities abroad8410
Miscellaneous2 6172 6172 434
Total corporate/public entities11 29112 15911 358
Retail customers17 07216 12517 024
Accrued interest costs1141507
Total deposits28 47728 43428 389
Deposits with floating interest rate (amortised cost)27 95727 97127 950
Deposits with fixed interest rate (fair value)520463439
 

Note 3

Losses and impairment on loans and guarantees

Specification of losses on loans, guarantees etc.   
 31.03.201531.03.201431.12.2014
Changes in individual impairment of loans and guarantees during the period-44-25
Changes in collective impairment during the period10026
Confirmed losses during the period where individual impairment had previously been made3420
Confirmed losses during the period where individual impairment had previously not been made1119
Recoveries2318
Losses on loans, guarantees etc.8622
    
Individual impairment on loans 
 31.03.201531.03.201431.12.2014
Individual impairment on loans as at 01.01141166166
Confirmed losses during the period, where individual impairment had previously been made3420
Increase in individual impairment during the period317
Individual impairment of new commitments during the period81129
Recoveries on individual impairment during the period10441
Individual impairment on loans at the end of the period139170141
    
Collective impairment on loans 
 31.03.201531.03.201431.12.2014
Collective impairment of loans as at 01.01166140140
Changes during the period10026
Collective impairment on loans at the end of the period176140166
    
Individual impairment on guarantees 
 31.03.201531.03.201431.12.2014
Individual impairment as at 01.01222
Individual impairment during the period000
Recoveries on individual impairment during the period100
Individual impairment at the end of the period122
 

Note 4

Defaulted and doubtful commitments

Problem loans         
(total of commitments in default above 3 months and commitments subject for individual impairment without being in default)
 31.03.201531.03.201431.12.2014
GROUPTotalRetailCorporateTotalRetailCorporateTotalRetailCorporate
Problem loans prior to individual impairment:         
Commitments in default above 3 months9054361326666864739
Other bad and doubtful commitments subject to impairment300302704253539030637269
Total problem loans prior to individual impairment3908430655710145639284308
Individual impairment on:         
Commitments in default above 3 months228142992021813
Other bad and doubtful commitments subject to impairment118131051411212912212110
Total individual impairment140211191702114914320123
Problem loans after individual impairment:         
Commitments in default above 3 months6846221035746653926
Other bad and doubtful commitments subject to impairment182171652842326118425159
Total problem loans less individual impairment250631873878030724964185
          
Total problem loans prior to individual impairment as a percentage of total loans0.770.261.711.210.332.930.800.261.83
Total problem loans less individual impairment as a percentage of total loans0.500.191.050.840.261.970.510.201.10
 

Note 5

Classification of financial instruments

Financial assets and financial liabilities are recognised in the balance sheet at the date when the Group becomes a party to the contractual provisions of the instrument. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or the company transfers the financial asset in such a way that risk and profit potential of the financial asset is substantially transferred. Financial liabilities are derecognised from the date when the rights to the contractual provisions have been extinguished, cancelled or expired.

 

CLASSIFICATION

The Group’s portfolio of financial instruments is at initial recognition classified in accordance with IAS 39. The bank’s classes of financial instruments and the measurement basis for these are the following:

• Financial assets and derivatives held for trading purposes (trading portfolio)

• Financial assets and liabilities assessed at fair value, any changes in value being recognised in the profit and loss account

• Financial instruments assessed as held available for sale at fair value, any changes in value recognised in other comprehensive income

• Loans and receivables

• Financial assets and liabilities assessed at amortised cost

 

Financial assets and derivatives held for trading

The Group's criteria for the classification of the trading portfolio are the following:

• Positions in financial instruments held for the Group’s own account for the purpose of selling on and/or financial instruments acquired by the Group in order to take advantage on a short-term basis of any actual and/or expected differences between purchase- and sale prices or any other price- and interest rate fluctuations.

• Positions held by the Group in order to hedge other parts of the trading portfolio

• Other commitments which are related to positions which form part of the trading portfolio

 

The Group’s trading portfolio is defined within this group and is assessed at fair value through profit or loss.

 

Financial assets and liabilities assessed at fair value, any changes in value recognised through profit or loss

The Group’s portfolio of fixed interest rate loans and – deposits, and the liquidity portfolio, are classified at fair value, with any changes in value being included in the profit and loss account, since these portfolios are managed based on fair value.

Losses and gains as a result of value changes of those assets and liabilities which are assessed at fair value, with any value changes being recognised in the profit and loss account, are included in the accounts during the period in which they occur.

 

Instruments held as available for sale, assessed at fair value, with any value changes shown in other comprehensive income

The Group’s portfolio of shares, which are not classified as held for trading, are classified as available for sale, with any value changes shown in other comprehensive income. Realised gains and losses, as well as impairment, are recognised in the profit and loss account during the period in which they occur.

 

Loans and receivables

All loans and receivables, including leasing, but with the exception of fixed interest rate loans, are assessed at amortised cost, based on expected cash flows. The difference between the issue cost of the securities and the settlement amount at maturity, is amortised over the lifetime of the loan.

 

Financial liabilities assessed at amortised cost

Debt securities, including debt securities included in fair value hedging, loans and deposits from credit institutions and deposits from customers without agreed maturity, are valued at amortised cost based on expected cash flows. The portfolio of own bonds is shown in the accounts as a reduction of the debt.

 

GROUP - Q1 2015Financial instruments at fair value through profit and loss accountFinancial instruments assessed at amortised costFinancial instruments held available for sale
 TradingAt fair value  
Cash and claims on Norges Bank  126 
Loans to and receivables from credit institutions  949 
Loans to and receivables from customers 4 82745 627 
Certificates and bonds 4 627  
Shares2  121
Financial derivatives1 009   
Total financial assets1 0119 45446 702121
Loans and deposits from credit institutions  569 
Deposits from and liabilities to customers 51627 961 
Financial derivatives639   
Debt securities  21 625 
Subordinated loan capital and Perpetual Hybrid Tier 1 capital  1 384 
Total financial liabilities63951651 539-
     
GROUP - Q1 2014Financial instruments at fair value through profit and loss accountFinancial instruments assessed at amortised costFinancial instruments held available for sale
 TradingAt fair value  
Cash and claims on Norges Bank  822 
Loans to and receivables from credit institutions  561 
Loans to and receivables from customers 4 31541 757 
Certificates and bonds 5 624  
Shares2  290
Financial derivatives486   
Total financial assets4889 93943 140290
Loans and deposits from credit institutions  329 
Deposits from and liabilities to customers 46427 970 
Financial derivatives262   
Debt securities 40518 183 
Subordinated loan capital and Perpetual Hybrid Tier 1 capital  1 528 
Total financial liabilities26286948 010-
Net gains/losses on financial instruments   
 31.03.201531.03.201431.12.2014
Certificates and bonds-8410
Securities0092
Foreign exchange trading (for customers)7627
Fixed income trading (for customers)1128
Financial derivatives101-9
Net change in value and gains/losses from financial instruments2013128
 

Note 6

Financial instruments at amortisied cost

GROUP31.03.201531.03.2014
 Fair valueBook valueFair valueBook value
Cash and claims on Norges Bank126126822822
Loans to and receivables from credit institutions949949561561
Loans to and receivables from customers45 62745 62741 75741 757
Total financial assets46 70246 70243 14043 140
Loans and deposits from credit institutions569569329329
Deposits from and liabilities to customers27 96127 96127 97027 970
Debt securities21 64921 62518 34418 183
Subordinated loan capital and Perpetual Hybrid Tier 1 capital1 4641 3841 6251 528
Total financial liabilities51 64351 53948 26848 010
GROUP - Q1 2015Based on prices in an active market Level 1Observable market information Level 2Other than observable market information Level 3Total
Cash and claims on Norges Bank126  126
Loans to and receivables from credit institutions 949 949
Loans to and receivables from customers  45 62745 627
Total financial assets12694945 62746 702
Loans and deposits from credit institutions 569 569
Deposits from and liabilities to customers  27 96127 961
Debt securities 21 649 21 649
Subordinated loan capital and Perpetual Hybrid Tier 1 capital 1 464 1 464
Total financial liabilities-23 68227 96151 643
     
GROUP - Q1 2014Based on prices in an active market Level 1Observable market information Level 2Other than observable market information Level 3Total
Cash and claims on Norges Bank822  822
Loans to and receivables from credit institutions 561 561
Loans to and receivables from customers  41 75741 757
Total financial assets82256141 75743 140
Loans and deposits from credit institutions 329 329
Deposits from and liabilities to customers  27 97027 970
Debt securities 18 344 18 344
Subordinated loan capital and Perpetual Hybrid Tier 1 capital 1 625 1 625
Total financial liabilities-20 29827 97048 268
 

Note 7

Financial instruments at fair value

GROUP - Q1 2015Based on prices in an active market Level 1Observable market information Level 2Other than observable market information Level 3Total
Cash and claims on Norges Bank   -
Loans to and receivables from credit institutions   -
Loans to and receivables from customers  4 8274 827
Certificates and bonds1 6812 946 4 627
Shares2 121123
Financial derivatives 1 009 1 009
Total financial assets1 6833 9554 94810 586
Loans and deposits from credit institutions   -
Deposits from and liabilities to customers  516516
Debt securities   -
Subordinated loan capital and Perpetual Hybrid Tier 1 capital   -
Financial derivatives 639 639
Total financial liabilities-6395161 155
     
     
GROUP - Q1 2014Based on prices in an active market Level 1Observable market information Level 2Other than observable market information Level 3Total
Cash and claims on Norges Bank   -
Loans to and receivables from credit institutions   -
Loans to and receivables from customers  4 3154 315
Certificates and bonds1 8083 816 5 624
Shares2 290292
Financial derivatives 486 486
Total financial assets1 8104 3024 60510 717
Loans and deposits from credit institutions   -
Deposits from and liabilities to customers  464464
Debt securities 405 405
Subordinated loan capital and Perpetual Hybrid Tier 1 capital   -
Financial derivatives 262 262
Total financial liabilities-6674641 131
GROUPLoans to and receivables from customersShares and other securitiesDeposits from and liabilities to customers
Recorded value as at 31.12.144 123114442
Purchases/additions1 016 98
Sales/reduction312 24
Transferred to Level 3   
Transferred from Level 3   
Net gains/losses recorded in the period 7 
Recorded value as at 31.03.154 827121516
    
    
GROUPLoans to and receivables from customersShares and other securitiesDeposits from and liabilities to customers
Recorded value as at 31.12.134 438194526
Purchases/additions58114
Sales/reduction65-76
Transferred to Level 3---
Transferred from Level 3---
Net gains/losses recorded in the period-11695-
Recorded value as at 31.03.144 315290464
 

Note 8

Operating segments

Result - Q1 2015GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income27331151550
Other operating income671521265
Total income340181361815
Operating costs1472628885
Profit before impairment193-8108930
Impairment on loans, guarantees etc.810-200
Pre tax profit185-18110930
Taxes50    
Profit after tax135    
      
      
Statement of financial position - 31.03.2015GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Loans to customers 1)50 4541 06717 33832 0490
Deposits from customers 1)28 4776949 47018 3130
Guarantee liabilities1 65201 64390
The deposit-to-loan ratio56.465.054.657.10
Man-years3801505316116
      
      
Result - Q1 2014GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income26911161520
Other operating income601618215
Total income329171341735
Operating costs1432328875
Profit before impairment186-6106860
Impairment on loans, guarantees etc.607-10
Pre tax profit180-699870
Taxes48    
Profit after tax132    
      
      
Statement of financial position - 31.03.2014GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Loans to customers 1)46 0721 01715 12729 9280
Deposits from customers 1)28 43488910 40417 1410
Guarantee liabilities1 29201 28390
The deposit-to-loan ratio61.50.068.857.30
Man-years3821485716118
      
1) The subsidiary, Møre Boligkreditt AS, is part of the Bank’s Retail segment. The mortgage company's main objective is to issue covered bonds for both national and international investors, and the company is part of Sparebanken Møre's long-term financing strategy. Key figures for Møre Boligkreditt AS are displayed in a separate table.
 MØRE BOLIGKREDITT AS
Statement of income31.03.201531.03.2014
Net interest income7576
Other operating income8-4
Total income8372
Operating costs77
Profit before impairment on loans7665
Impairment on loans, guarantees etc.00
Pre tax profit7665
Taxes2117
Profit after tax5548
   
   
Statement of financial position31.03.201531.03.2014
Loans to and receivables from customers15 77214 700
 

Note 9

Transactions with related parties

These are transactions between the Parent Bank and wholly-owned subsidiaries which have been done at arm`s length and at arm`s length`s prices.
The most important transactions which have been done and netted out in the Group accounts are as follows:
PARENT BANK31.03.201531.03.201431.12.2014
Statement of income   
Interest and credit commission income from subsidiaries61034
Received dividend and group contribution from subsidiaries191152152
Rent paid to Sparebankeiendom AS4417
Administration fee received from Møre Boligkreditt AS6522
    
Statement of financial position   
Claims on subsidiaries1 3181 3241 069
Covered bonds1951025
Liabilities to subsidiaries582121122
Accumulated loan portfolio transferred to Møre Boligkreditt AS15 77414 70115 544
 

Note 10

EC capital

The 20 largest EC holders in Sparebanken Møre as at 31.03.2015Number of ECsPercentage share of EC capital
Sparebankstiftelsen Tingvoll945 0009.56
MP Pensjon450 2824.55
Verdipapirfond Pareto Aksje Norge370 0153.74
VPF Nordea Norge Verdi327 0733.31
Pareto AS305 1893.09
Wenaasgruppen AS250 0002.53
FLPS - Princ All Sec239 9342.43
Verdipapirfond Pareto Aktiv214 8382.17
Bergen Kommunale Pensjonskasse200 0002.02
VPF Fondsfinans Spar200 0002.02
Beka Holding AS150 1001.52
Verdipapirfondet Eika utbytte137 1971.39
Farstad Shipping ASA126 9091.28
Lapas AS (Leif-Arne Langøy)105 5001.07
Sparebanken Møre104 4161.06
Pareto Verdi Verdipapirfond101 7861.03
Odd Slyngstad84 7730.86
Andvord AS68 7500.70
Stiftelsen Kjell Holm62 3540.63
Forsvarets Personellservice53 9600.55
Total 20 largest4 498 07645.50
Total9 886 954100.00
 

Note 11

Capital adequacy

 31.03.201531.03.201431.12.2014
EC capital989989989
- ECs owned by the Bank-11-10-11
Share premium fund354353353
Dividend equalisation fund799682799
Gift fund125125125
Primary capital fund2 0491 9312 048
Value adjustment fund344734
Proposed dividend for the EC holders00133
Proposed dividend for the local community00136
Other equity238196238
Accumulated profit for the period1322090
Total equity4 7094 5214 844
Deferred tax, goodwill and intangible assets-20-19-20
Value adjustments of financial instruments at fair value-120-12
Value adjustment fund-34-47-34
50 % deduction for equity in other financial institutions0-140
Perpetual Hybrid Tier 1 capital8071 000860
Deduction for overfunded pension liability0-700
Expected losses exceeding actual losses, IRB portfolios corporate-2590-193
Proposed dividend for the EC holders00-133
Proposed dividend for the local community00-136
Accumulated profit for the period-132-2090
Total core capital5 0595 1625 176
Common equity Tier 1 Capital4 2524 1624 316
    
Supplementary capital   
Subordinated loan capital of limited duration525499501
36 % addition for net unrealised gains on shares available for sale01212
50 % deduction for equity in other financial institutions000
Total supplementary capital525511513
Net equity and subordinated loan capital5 5845 6735 689
    
    
Exposure classes SA - credit risk   
Central governments or central banks000
Regional governments or local authorities564
Public sector companies202221
Institutions (banks etc)453651
Companies (corporate customers)3178633
Mass marked (retail banking customers)-27126
Secured by mortgage on immovable property-1 245976
Exposures in default4113
Covered bonds141913
Equity666
Other items849681
Total capital requirements - credit risk, The Standardised Approach2092 4981 214
    
Exposure classes IRB - credit risk   
Retail - Secured by real estate528--
Retail - Other65--
SME847-854
Specialised lending490-440
Other corporate lending196-174
IRB-F capital requirements2 12601 468
Total capital requirements - credit risk2 3352 4982 682
    
Exposure classes SA - market risk   
Debt000
Equity000
Foreign exchange000
Credit value adjustment risk (CVA)20021
Total capital requirements - market risk20021
Operational Risk (Basic Indicator Approach)190179179
Deductions from the capital requirement0-14-14
Total capital requirement less transitional rules2 5452 6632 868
Additional capital requirements from transitional rules 1)000
Total capital requirements2 5452 6632 868
    
Risk-weighted assets (calculation basis for capital adequacy ratio)   
Risk-weighted assets less transitional rules31 78733 28036 036
Additional RWA from transitional rules 1)000
Total risk-weighted assets31 78733 28036 036
Minimum requirement common equity Tier 1 capital (4.5 %)1 430-1 622
    
1) Transitional rules require that RWA can not be less than 80 per cent of the corresponding Basel I requirement.
    
    
Buffer Requirement   
Capital conservation buffer (2.5 %)795-900
Systemic risk buffer (3.0 %)954-1 081
Total buffer requirements1 748-1 981
Available common equity Tier 1 capital after buffer requirements1 073-713
    
Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules
Capital adequacy ratio17.617.015.8
Capital adequacy ratio incl. 50 per cent of the profit for the period17.817.4 
Core capital ratio15.915.514.4
Core capital ratio incl. 50 per cent of the profit for the period16.115.8 
Core Tier 1 capital ratio13.412.512.0
Core Tier 1 capital ratio incl. 50 per cent of the profit for the period13.612.8 
    
Sparebanken Møre's capital requirements have been based on IRB-Foundation for corporate commitments from 30th June 2014 and IRB-Retail for retail commitments from 31st March 2015.