Notes - Unaudited Interim Report 2 Quarter 2015

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 30 June 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

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GROUP	Loans
Broken down according to sectors	30.06.2015	30.06.2014	31.12.2014
Agriculture and forestry	406	466	463
Fisheries	3 247	2 935	3 279
Manufacturing	1 794	1 683	2 217
Building and construction	675	768	603
Wholesale and retail trade, hotels	542	586	577
Foreign shipping/supply	1 597	1 102	1 610
Property management	6 229	5 597	5 637
Professional/financial services	1 016	768	787
Transport and private/public services	1 299	1 627	1 311
Public entities	2	12	38
Activities abroad	126	130	135
Miscellaneous	144	117	160
Total corporate/public entities	17 077	15 791	16 817
Retail customers	33 588	31 170	32 245
Accrued interest income	105	111	129
Total loans	50 770	47 072	49 191
Individual impairment	-111	-162	-141
Collective impairment	-201	-144	-166
Loans to and receivables from customers	50 458	46 766	48 884
Loans with floating interest rate (amortised cost)	45 487	42 772	45 250
Loans with fixed interest rate (fair value)	5 283	4 300	3 941


GROUP	Deposits
Broken down according to sectors	30.06.2015	30.06.2014	31.12.2014
Agriculture and forestry	195	185	163
Fisheries	461	326	457
Manufacturing	906	1 197	1 138
Building and construction	436	575	484
Wholesale and retail trade, hotels	716	630	688
Foreign shipping/supply	525	545	311
Property management	1 484	1 288	1 597
Professional/financial services	1 764	1 796	1 370
Transport and private/public services	1 607	1 880	2 009
Public entities	928	826	697
Activities abroad	4	8	10
Miscellaneous	2 682	2 573	2 434
Total corporate/public entities	11 708	11 829	11 358
Retail customers	18 051	16 988	17 024
Accrued interest costs	200	278	7
Total deposits	29 959	29 095	28 389
Deposits with floating interest rate (amortised cost)	29 623	28 629	27 950
Deposits with fixed interest rate (fair value)	336	466	439

Note 3

Losses and impairment on loans and guarantees

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	Q2 2015	Q2 2014	30.06.2015	30.06.2014	31.12.2014
Specification of losses on loans, guarantees etc.
Changes in individual impairment of loans and guarantees during the period	-26	-12	-30	-8	-25
Changes in collective impairment during the period	25	4	35	4	26
Confirmed losses during the period where individual impairment had previously been made	6	11	9	15	20
Confirmed losses during the period where individual impairment had previously not been made	7	6	8	7	19
Recoveries	5	1	7	4	18
Losses on loans, guarantees etc.	7	8	15	14	22


Individual impairment on loans
	Q2 2015	Q2 2014	30.06.2015	30.06.2014	31.12.2014
Individual impairment on loans as at 01.01/01.04	139	170	141	166	166
Confirmed losses during the period, where individual impairment had previously been made	6	11	9	15	20
Increase in individual impairment during the period	1	5	4	6	7
Individual impairment of new commitments during the period	8	9	16	20	29
Recoveries on individual impairment during the period	31	9	41	15	41
Individual impairment on loans at the end of the period	111	162	111	162	141


Collective impairment on loans
	Q2 2015	Q2 2014	30.06.2015	30.06.2014	31.12.2014
Collective impairment of loans as at 01.01/01.04	176	140	166	140	140
Changes during the period	25	4	35	4	26
Collective impairment on loans at the end of the period	201	144	201	144	166


Individual impairment on guarantees
	Q2 2015	Q2 2014	30.06.2015	30.06.2014	31.12.2014
Individual impairment as at 01.01/01.04	2	2	2	2	2
Individual impairment during the period	0	0	0	0	0
Recoveries on individual impairment during the period	0	0	0	0	0
Individual impairment at the end of the period	2	2	2	2	2

Note 4

Defaulted and doubtful commitments

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GROUP	Total	Retail	Corporate	Total	Retail	Corporate	Total	Retail	Corporate
Problem loans
(total of commitments in default above 3 months and commitments subject for individual impairment without being in default)
	30.06.2015			30.06.2014			31.12.2014
Problem loans prior to individual impairment:
Commitments in default above 3 months	65	45	20	80	50	30	86	47	39
Other bad and doubtful commitments subject to impairment	308	36	272	437	35	402	306	37	269
Total problem loans prior to individual impairment	373	81	292	517	85	432	392	84	308
Individual impairment on:
Commitments in default above 3 months	18	8	10	19	8	11	21	8	13
Other bad and doubtful commitments subject to impairment	95	12	83	143	13	130	122	12	110
Total individual impairment	113	20	93	162	21	141	143	20	123
Problem loans after individual impairment:
Commitments in default above 3 months	47	37	10	61	42	19	65	39	26
Other bad and doubtful commitments subject to impairment	213	24	189	294	22	272	184	25	159
Total problem loans less individual impairment	260	61	199	355	64	291	249	64	185

Total problem loans prior to individual impairment as a percentage of total loans	0.74	0.24	1.72	1.11	0.27	2.74	0.80	0.26	1.83
Total problem loans less individual impairment as a percentage of total loans	0.52	0.18	1.18	0.76	0.21	1.84	0.51	0.20	1.10

Note 5

Classification of financial instruments

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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 debt.

GROUP - 30.06.2015	Financial instruments at fair value through profit and loss account		Financial instruments assessed at amortised cost	Financial instruments held available for sale
	Trading	At fair value
Cash and claims on Norges Bank			1 309
Loans to and receivables from credit institutions			940
Loans to and receivables from customers		5 283	45 175
Certificates and bonds		4 680
Shares	3			120
Financial derivatives	892
Total financial assets	895	9 963	47 424	120
Loans and deposits from credit institutions			1 175
Deposits from and liabilities to customers		336	29 623
Financial derivatives	541
Debt securities			20 201
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 340
Total financial liabilities	541	336	52 339	-

GROUP - 30.06.2014	Financial instruments at fair value through profit and loss account		Financial instruments assessed at amortised cost	Financial instruments held available for sale
	Trading	At fair value
Cash and claims on Norges Bank			926
Loans to and receivables from credit institutions			668
Loans to and receivables from customers		4 300	42 466
Certificates and bonds		5 244
Shares	2			293
Financial derivatives	605
Total financial assets	607	9 544	44 060	293
Loans and deposits from credit institutions			640
Deposits from and liabilities to customers		466	28 629
Financial derivatives	462
Debt securities			18 050
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 539
Total financial liabilities	462	466	48 858	-

	Q2 2015	Q2 2014	30.06.2015	30.06.2014	31.12.2014
Net gains/losses on financial instruments
Certificates and bonds	-2	5	-9	9	10
Securities	1	-1	1	-1	92
Foreign exchange trading (for customers)	8	6	15	12	27
Fixed income trading (for customers)	6	1	17	3	8
Financial derivatives	0	6	9	7	-9
Net change in value and gains/losses from financial instruments	13	17	33	30	128

Note 6

Financial instruments at amortised cost

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GROUP	30.06.2015		30.06.2014
	Fair value	Book value	Fair value	Book value
Cash and claims on Norges Bank	1 309	1 309	926	926
Loans to and receivables from credit institutions	940	940	668	668
Loans to and receivables from customers	45 175	45 175	42 466	42 466
Total financial assets	47 424	47 424	44 060	44 060
Loans and deposits from credit institutions	1 175	1 175	640	640
Deposits from and liabilities to customers	29 623	29 623	28 629	28 629
Debt securities	20 308	20 201	18 208	18 050
Subordinated loan capital and Perpetual Hybrid Tier 1 capital	1 419	1 340	1 638	1 539
Total financial liabilities	52 525	52 339	49 115	48 858

GROUP - 30.06.2015	Based on prices in an active market Level 1	Observable market information Level 2	Other than observable market information Level 3	Total
Cash and claims on Norges Bank	1 309			1 309
Loans to and receivables from credit institutions		940		940
Loans to and receivables from customers			45 175	45 175
Total financial assets	1 309	940	45 175	47 424
Loans and deposits from credit institutions		1 175		1 175
Deposits from and liabilities to customers			29 623	29 623
Debt securities		20 308		20 308
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 419		1 419
Total financial liabilities	-	22 902	29 623	52 525

GROUP - 30.06.2014	Based on prices in an active market Level 1	Observable market information Level 2	Other than observable market information Level 3	Total
Cash and claims on Norges Bank	926			926
Loans to and receivables from credit institutions		668		668
Loans to and receivables from customers			42 466	42 466
Total financial assets	926	668	42 466	44 060
Loans and deposits from credit institutions		640		640
Deposits from and liabilities to customers			28 629	28 629
Debt securities		18 208		18 208
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 638		1 638
Total financial liabilities	-	20 486	28 629	49 115

Note 7

Financial instruments at fair value

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GROUP - 30.06.2015	Based on prices in an active market Level 1	Observable market information Level 2	Other than observable market information Level 3	Total
Cash and claims on Norges Bank				-
Loans to and receivables from credit institutions				-
Loans to and receivables from customers			5 283	5 283
Certificates and bonds	1 701	2 979		4 680
Shares	9		114	123
Financial derivatives		892		892
Total financial assets	1 710	3 871	5 397	10 978
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			336	336
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		541		541
Total financial liabilities	-	541	336	877


GROUP - 30.06.2014	Based on prices in an active market Level 1	Observable market information Level 2	Other than observable market information Level 3	Total
Cash and claims on Norges Bank				-
Loans to and receivables from credit institutions				-
Loans to and receivables from customers			4 300	4 300
Certificates and bonds	1 636	3 608		5 244
Shares	19		276	295
Financial derivatives		605		605
Total financial assets	1 655	4 213	4 576	10 444
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			466	466
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		462		462
Total financial liabilities	-	462	466	928

GROUP	Loans to and receivables from customers	Shares and other securities	Deposits from and liabilities to customers
Recorded value as at 31.12.14	4 123	114	442
Purchases/additions	2 008	-	114
Sales/reduction	886	2	220
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses recorded in the period	38	2	-
Recorded value as at 30.06.15	5 283	114	336


GROUP	Loans to and receivables from customers	Shares and other securities	Deposits from and liabilities to customers
Recorded value as at 31.12.13	4 438	194	526
Purchases/additions	116	1	81
Sales/reduction	250	-	141
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses recorded in the period	-4	81	-
Recorded value as at 30.06.14	4 300	276	466

Note 8

Operating segments

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Result - Q2 2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	269	-4	116	157	0
Other operating income	65	11	24	24	6
Total income	334	7	140	181	6
Operating costs	144	28	26	85	5
Profit before impairment	190	-21	114	96	1
Impairment on loans, guarantees etc.	7	24	-16	-1	0
Pre tax profit	183	-45	130	97	1
Taxes	49
Profit after tax	134


Result - 30.06.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	542	-1	231	312	0
Other operating income	132	26	45	50	11
Total income	674	25	276	362	11
Operating costs	291	54	54	173	10
Profit before impairment	383	-29	222	189	1
Impairment on loans, guarantees etc.	15	34	-18	-1	0
Pre tax profit	368	-63	240	190	1
Taxes	99
Profit after tax	269


Statement of financial position - 30.06.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	50 458	1 020	16 640	32 798	0
Deposits from customers 1)	29 959	939	9 696	19 324	0
Guarantee liabilities	1 711	0	1 702	9	0
The deposit-to-loan ratio	59.4	92.1	58.3	58.9	0
Man-years	385	151	56	163	15


Result - Q2 2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	268	5	116	147	0
Other operating income	62	16	17	23	6
Total income	330	21	133	170	6
Operating costs	144	48	21	69	6
Profit before impairment	186	-27	112	101	0
Impairment on loans, guarantees etc.	8	4	5	-1	0
Pre tax profit	178	-31	107	102	0
Taxes	47
Profit after tax	131


Result - 30.06.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	537	6	232	299	0
Other operating income	122	32	35	44	11
Total income	659	38	267	343	11
Operating costs	287	71	49	156	11
Profit before impairment	372	-33	218	187	0
Impairment on loans, guarantees etc.	14	4	12	-2	0
Pre tax profit	358	-37	206	189	0
Taxes	95
Profit after tax	263


Statement of financial position - 30.06.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	46 766	897	15 382	30 487	0
Deposits from customers 1)	29 095	687	10 089	18 319	0
Guarantee liabilities	1 393	0	1 385	8	0
The deposit-to-loan ratio	62.2	74.0	65.1	59.6	0
Man-years	380	148	54	162	16

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.

Statement of income	Q2 2015	Q2 2014
	MØRE BOLIGKREDITT AS
Net interest income	67	73
Other operating income	-1	1
Total income	66	74
Operating costs	9	8
Profit before impairment on loans	57	66
Impairment on loans, guarantees etc.	2	1
Pre tax profit	55	65
Taxes	14	18
Profit after tax	41	47


	MØRE BOLIGKREDITT AS
Statement of income	30.06.2015	30.06.2014
Net interest income	142	149
Other operating income	7	-3
Total income	149	146
Operating costs	16	15
Profit before impairment on loans	133	131
Impairment on loans, guarantees etc.	2	1
Pre tax profit	131	130
Taxes	35	35
Profit after tax	96	95


Statement of financial position	30.06.2015	30.06.2014
Loans to and receivables from customers	16 030	15 146

Note 9

Transactions with related parties

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PARENT BANK	30.06.2015	30.06.2014	31.12.2014
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:
Statement of income
Interest and credit commission income from subsidiaries	11	17	34
Received dividend and group contribution from subsidiaries	191	152	152
Rent paid to Sparebankeiendom AS	9	9	17
Administration fee received from Møre Boligkreditt AS	12	11	22

Statement of financial position
Claims on subsidiaries	1 416	2 006	1 069
Covered bonds	75	0	25
Liabilities to subsidiaries	236	109	122
Accumulated loan portfolio transferred to Møre Boligkreditt AS	16 034	15 148	15 546

Note 10

EC capital

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The 20 largest EC holders in Sparebanken Møre as at 30.06.2015	Number of ECs	Percentage share of EC capital
Sparebankstiftelsen Tingvoll	981 000	9.92
MP Pensjon	430 282	4.35
VPF Nordea Norge Verdi	327 073	3.31
Verdipapirfond Pareto Aksje Norge	320 824	3.24
Pareto AS	305 189	3.09
Wenaasgruppen AS	282 000	2.85
FLPS - Princ All Sec	238 334	2.41
Verdipapirfond Pareto Aktiv	210 301	2.13
Bergen Kommunale Pensjonskasse	210 000	2.12
VPF Fondsfinans Norge	190 000	1.92
Sparebanken Møre	150 666	1.52
Beka Holding AS	150 100	1.52
Farstad Shipping ASA	126 909	1.28
Lapas AS (Leif-Arne Langøy)	105 500	1.07
Pareto Verdi Verdipapirfond	103 586	1.05
Verdipapirfondet Eika utbytte	92 087	0.93
Odd Slyngstad	84 773	0.86
Andvord AS	71 400	0.72
Stiftelsen Kjell Holm	60 635	0.61
Forsvarets Personellservice	53 960	0.55
Total 20 largest	4 494 619	45.46
Total	9 886 954	100.00

Note 11

Capital adequacy

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	30.06.2015	30.06.2014	31.12.2014
EC capital	989	989	989
- ECs owned by the Bank	-15	-9	-11
Share premium	354	353	353
Dividend equalisation fund	799	683	799
Gift fund	125	125	125
Primary capital fund	2 044	1 932	2 048
Value adjustment fund	34	47	34
Proposed dividend for the EC holders	0	0	133
Proposed dividend for the local community	0	0	136
Other equity	238	196	238
Total comprehensive income after tax	267	342	0
Total equity	4 835	4 658	4 844
Deferred tax, goodwill and intangible assets	-50	-19	-20
Value adjustments of financial instruments at fair value	-12	0	-12
Value adjustment fund	-34	-47	-34
50 % deduction for equity in other financial institutions	0	-14	0
Perpetual Hybrid Tier 1 capital	805	1 003	860
Deduction for overfunded pension liability	0	-70	0
Expected losses exceeding actual losses, IRB portfolios corporate	-255	-173	-193
Proposed dividend for the EC holders	0	0	-133
Proposed dividend for the local community	0	0	-136
Total comprehensive income after tax	-267	-342	0
Total core capital	5 022	4 995	5 176
Common equity Tier 1 Capital	4 217	3 992	4 316

Supplementary capital
Subordinated loan capital of limited duration	502	499	501
36 % addition for net unrealised gains on shares available for sale	0	20	12
50 % deduction for equity in other financial institutions	0	-14	0
Total supplementary capital	502	505	513
Net equity and subordinated loan capital	5 524	5 500	5 689

Capital requirement by exposure classes

Exposure classes SA - credit risk
Central governments or central banks	0	0	0
Regional governments or local authorities	5	5	4
Public sector companies	21	22	21
Institutions (banks etc)	41	38	51
Companies (corporate customers)	29	35	33
Mass marked (retail banking customers)	0	0	26
Secured by mortgage on immovable property	0	1 064	976
Exposures in default	0	2	3
Covered bonds	14	15	13
Equity	8	6	6
Other items	93	79	81
Total capital requirements - credit risk, The Standardised Approach	211	1 266	1 214

Exposure classes IRB - credit risk
Retail - Secured by real estate	570	-	-
Retail - Other	52	-	-
SME	884	907	854
Specialised lending	495	419	440
Other corporate lending	185	0	174
IRB-F capital requirements	2 186	1 326	1 468
Total capital requirements - credit risk	2 397	2 592	2 682

Exposure classes SA - market risk
Debt	0	0	0
Equity	0	0	0
Foreign exchange	0	0	0
Credit value adjustment risk (CVA)	18	0	21
Total capital requirements - market risk	18	0	21
Operational Risk (Basic Indicator Approach)	190	180	179
Deductions from the capital requirement	0	-14	-14
Total capital requirement less transitional rules	2 605	2 758	2 868
Additional capital requirements from transitional rules 1)	0	0	0
Total capital requirements	2 605	2 758	2 868

Risk-weighted assets (calculation basis for capital adequacy ratio)
Risk-weighted assets less transitional rules	32 580	34 560	36 036
Additional RWA from transitional rules 1)	0	0	0
Total risk-weighted assets	32 580	34 560	36 036
Minimum requirement common equity Tier 1 capital (4.5 %)	1 466	-	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 %)	815	-	900
Systemic risk buffer (3.0 %)	977	-	1 081
Total buffer requirements	1 792	-	1 981
Available common equity Tier 1 capital after buffer requirements	959	-	713

Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules
Capital adequacy ratio	17.0	15.9	15.8
Capital adequacy ratio incl. 50 per cent of the profit for the period	17.4	16.4
Core capital ratio	15.4	14.7	14.4
Core capital ratio incl. 50 per cent of the profit for the period	15.8	15.2
Core Tier 1 capital ratio	13.0	11.8	12.0
Core Tier 1 capital ratio incl. 50 per cent of the profit for the period	13.5	12.3

Sparebanken Møre's capital requirements as of 30th June 2015 is based on IRB-Foundation for corporate commitments and IRB-Retail for retail commitments.