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 September 2017. 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 2016 financial statements. There have been no changes or new standards coming into force in so far in 2017.

Please see the Annual report 2016 for further description of accounting principles.  

 

Note 2

Loans and deposits broken down according to sectors

GROUPLoans
Broken down according to sectors30.09.201730.09.201631.12.2016
Agriculture and forestry402372390
Fisheries2 3032 5342 281
Manufacturing2 6002 0832 327
Building and construction616603562
Wholesale and retail trade, hotels634517525
Supply/Offshore8231 062956
Property management6 4825 6815 804
Professional/financial services1 299779881
Transport and private/public services2 0941 7201 891
Public entities004
Activities abroad117116113
Total corporate/public entities17 37015 46715 734
Retail customers39 24536 41537 133
Fair value adjustment of loans7212186
Accrued interest income938798
Total loans56 78052 09053 051
Individual impairment-45-70-79
Collective impairment-247-267-281
Loans to and receivables from customers56 48851 75352 691
Loans with floating interest rate (amortised cost)52 64147 28348 307
Loans with fixed interest rate (fair value)4 1394 8074 744
    
    
GROUPDeposits
Broken down according to sectors30.09.201730.09.201631.12.2016
Agriculture and forestry185204196
Fisheries1 494863851
Manufacturing1 4452 0602 080
Building and construction553558583
Wholesale and retail trade, hotels754720799
Property management1 3451 3331 230
Professional/financial services1 9242 0942 316
Transport and private/public services2 8012 8392 745
Public entities7901 0321 084
Activities abroad5510
Miscellaneous1 9341 9821 983
Total corporate/public entities13 23013 69013 877
Retail customers19 69618 51218 675
Fair value adjustment of deposits100
Accrued interest costs15514810
Total deposits33 08232 35032 562
Deposits with floating interest rate (amortised cost)31 78831 21531 308
Deposits with fixed interest rate (fair value)1 2941 1351 254
 

Note 3

Lossess and impairment on loans and guarantees

Specification of losses on loans, guarantees etc.     
 Q3 2017Q3 201630.09.201730.09.201631.12.2016
Changes in individual impairment of loans and guarantees during the period-2016-91
Changes in collective impairment during the period65-34519
Confirmed losses during the period where individual impairment had previously been made112588
Confirmed losses during the period where individual impairment had previously not been made211145
Recoveries124811
Losses on loans, guarantees etc.6514022
      
      
Individual impairment on loans
 Q3 2017Q3 201630.09.201730.09.201631.12.2016
Individual impairment on loans as at 01.01/01.074770797979
Confirmed losses during the period, where individual impairment had previously been made112588
Increase in individual impairment during the period02457
Individual impairment of new commitments during the period134926
Recoveries on individual impairment during the period24171525
Individual impairment on loans at the end of the period4570457079
      
      
Collective impairment on loans
 Q3 2017Q3 201630.09.201730.09.201631.12.2016
Collective impairment of loans as at 01.01/01.07241262281262262
Changes during the period65-34519
Collective impairment on loans at the end of the period247267247267281
      
      
Individual impairment on guarantees
 Q3 2017Q3 201630.09.201730.09.201631.12.2016
Individual impairment as at 01.01/01.07500000
Individual impairment during the period005000
Recoveries on individual impairment during the period00000
Individual impairment at the end of the period5005000
 

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)
 30.09.201730.09.201631.12.2016
GROUPTotalRetailCorporateTotalRetailCorporateTotalRetailCorporate
Problem loans prior to individual impairment:         
Commitments in default above 3 months826616844737654520
Other bad and doubtful commitments subject to impairment274132611411512654624522
Total problem loans prior to individual impairment356792772256216361169542
Individual impairment on:         
Commitments in default above 3 months4221331015312
Other bad and doubtful commitments subject to impairment91487571047641054
Total individual impairment95689701357791366
Problem loans after individual impairment:         
Commitments in default above 3 months78641471442750428
Other bad and doubtful commitments subject to impairment18391748457948214468
Total problem loans less individual impairment261731881554910653256476
          
Total problem loans prior to individual impairment as a percentage of total loans0.610.201.450.430.171.051.160.193.45
Total problem loans less individual impairment as a percentage of total loans0.450.190.990.300.130.681.010.153.03
 

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 (trading portfolio)

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

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

• Loans and receivables

• Financial liabilities assessed at amortised cost

Financial assets and derivatives held for trading
Financial derivatives are contracts signed to mitigate an existing interest rate or currency risk incurred by the bank. Financial derivatives are recognized at fair value through profit or loss and recognized gross pr. contract as an asset or liability.

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

• Positions in financial instruments held for the Group’s own account for the purpose of selling 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 of shares 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 bonds in the liquidity portfolio is classified at fair value through profit or loss as this portfolio is managed based on fair value. The Group’s portfolio of fixed interest rate loans and deposits are classified to avoid accounting mismatch in relation to the underlying interest rate swaps.  

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, any changes in value recognised 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 below cost, are recognised in the profit and loss account during the period in which they occur.

The Group`s owner interest in Visa Norway FLI is classified as a financial asset in the category available for sale in level three in the valuation hierarchy. The change in value of this asset is recognized in other comprehensive income.

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.

LEVELS IN THE VALUATION HIERARCHY
Financial instruments are classified into different levels based on the quality of market data for each type of instrument.

Level 1 – Valuation based on prices in an active market
Level 1 comprises financial instruments valued by using quoted prices in active markets for identical assets or liabilities. This category includes listed shares and mutual funds, as well as bonds and certificates traded in active markets.

Level 2 – Valuation based on observable market data
Level 2 comprises financial instruments valued by using information which is not quoted prices, but where prices are directly or indirectly observable for assets or liabilities, including quoted prices in inactive markets for identical assets or liabilities. This category mainly includes debt securities issued, derivatives and bonds which are not included in level 1.

Level 3 – Valuation based on other than observable market data
Level 3 comprises financial instruments which can not be valued based on directly or indirectly observable prices. This category mainly includes loans to and deposits from customers, as well as shares.

 

 

GROUP - 30.09.2017Financial 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  1 304 
Loans to and receivables from credit institutions  675 
Loans to and receivables from customers 4 13952 349 
Certificates and bonds 6 307  
Shares and other securities   169
Financial derivatives847   
Total financial assets84710 44654 328169
Loans and deposits from credit institutions  725 
Deposits from and liabilities to customers 1 29431 788 
Financial derivatives405   
Debt securities  24 042 
Subordinated loan capital and Perpetual Hybrid Tier 1 capital  1 334 
Total financial liabilities4051 29457 889-
     
GROUP - 30.09.2016Financial 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  439 
Loans to and receivables from credit institutions  622 
Loans to and receivables from customers 4 80746 946 
Certificates and bonds 7 210  
Shares and other securities1  125
Financial derivatives1 146   
Total financial assets1 14712 01748 007125
Loans and deposits from credit institutions  649 
Deposits from and liabilities to customers 1 13531 215 
Financial derivatives503   
Debt securities  20 998 
Subordinated loan capital and Perpetual Hybrid Tier 1 capital  1 312 
Total financial liabilities5031 13554 174-
Net gains/losses on financial instruments     
 Q3 2017Q3 201630.09.201730.09.201631.12.2016
Certificates and bonds017232724
Securities-47-94441
Foreign exchange trading (for customers)97292433
Fixed income trading (for customers)013911
Financial derivatives-2-7-7-6-12
Net change in value and gains/losses from financial instruments325399897
 

Note 6

Financial instruments at amortised cost

GROUP30.09.201730.09.2016
 Fair valueBook valueFair valueBook value
Cash and claims on Norges Bank1 3041 304439439
Loans to and receivables from credit institutions675675622622
Loans to and receivables from customers52 34952 34946 94646 946
Total financial assets54 32854 32848 00748 007
Loans and deposits from credit institutions725725649649
Deposits from and liabilities to customers31 78831 78831 21531 215
Debt securities24 13824 04221 01920 998
Subordinated loan capital and Perpetual Hybrid Tier 1 capital1 3631 3341 3451 312
Total financial liabilities58 01457 88954 22854 174
GROUP - 30.09.2017Based on prices in an active marketObservable market informationOther than observable market information 
 Level 1Level 2Level 3Total
Cash and claims on Norges Bank1 304  1 304
Loans to and receivables from credit institutions 675 675
Loans to and receivables from customers  52 34952 349
Total financial assets1 30467552 34954 328
Loans and deposits from credit institutions 725 725
Deposits from and liabilities to customers  31 78831 788
Debt securities 24 138 24 138
Subordinated loan capital and Perpetual Hybrid Tier 1 capital 1 363 1 363
Total financial liabilities-26 22631 78858 014
     
GROUP - 30.09.2016Based on prices in an active marketObservable market informationOther than observable market information 
 Level 1Level 2Level 3Total
Cash and claims on Norges Bank439  439
Loans to and receivables from credit institutions 622 622
Loans to and receivables from customers  46 94646 946
Total financial assets43962246 94648 007
Loans and deposits from credit institutions 649 649
Deposits from and liabilities to customers  31 21531 215
Debt securities 21 019 21 019
Subordinated loan capital and Perpetual Hybrid Tier 1 capital 1 345 1 345
Total financial liabilities-23 01331 21554 228
 

Note 7

Financial instruments at fair value

GROUP - 30.09.2017Based on prices in an active marketObservable market informationOther than observable market information 
 Level 1Level 2Level 3Total
Cash and claims on Norges Bank   -
Loans to and receivables from credit institutions   -
Loans to and receivables from customers  4 1394 139
Certificates and bonds1 8844 423 6 307
Shares and other securities16 153169
Financial derivatives 847 847
Total financial assets1 9005 2704 29211 462
Loans and deposits from credit institutions   -
Deposits from and liabilities to customers  1 2941 294
Debt securities   -
Subordinated loan capital and Perpetual Hybrid Tier 1 capital   -
Financial derivatives 405 405
Total financial liabilities-4051 2941 699
     
     
GROUP - 30.09.2016Based on prices in an active marketObservable market informationOther than observable market information 
 Level 1Level 2Level 3Total
Cash and claims on Norges Bank   -
Loans to and receivables from credit institutions   -
Loans to and receivables from customers  4 8074 807
Certificates and bonds1 9555 255 7 210
Shares and other securities5 121126
Financial derivatives 1 146 1 146
Total financial assets1 9606 4014 92813 289
Loans and deposits from credit institutions   -
Deposits from and liabilities to customers  1 1351 135
Debt securities   -
Subordinated loan capital and Perpetual Hybrid Tier 1 capital   -
Financial derivatives 503 503
Total financial liabilities-5031 1351 638
GROUPLoans to and receivables from customersShares and other securitiesDeposits from and liabilities to customers
Recorded value as at 31.12.164 7441281 254
Purchases/additions22448425
Sales/reduction8433385
Transferred to Level 3   
Transferred from Level 3   
Net gains/losses in the period14-4 
Recorded value as at 30.09.174 1391691 294
    
    
GROUPLoans to and receivables from customersShares and other securitiesDeposits from and liabilities to customers
Recorded value as at 31.12.155 337161514
Purchases/additions311-695
Sales/reduction7834074
Transferred to Level 3---
Transferred from Level 3---
Net gains/losses in the period-58--
Recorded value as at 30.09.164 8071211 135
 

Note 8

Operating segments

Result - Q3 2017GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income281-81081810
Other operating income55-124293
Total income336-91322103
Operating costs1452328913
Profit before impairment191-321041190
Impairment on loans, guarantees etc.663-30
Pre tax profit185-381011220
Taxes46    
Profit after tax139    
      
      
Result - 30.09.2017GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income810-173155120
Other operating income18428697512
Total income9941138458712
Operating costs446828326813
Profit before impairment548-71301319-1
Impairment on loans, guarantees etc.14614-60
Pre tax profit534-77287325-1
Taxes134    
Profit after tax400    
      
      
Key figures - 30.09.2017GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Loans to customers 1)56 48892017 05338 5150
Deposits from customers 1)33 08262711 44821 0070
Guarantee liabilities1 70001 689110
The deposit-to-loan ratio58.668.267.154.50.0
Man-years3631565114313
      
      
Result - Q3 2016GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income271-121071760
Other operating income742221265
Total income345101282025
Operating costs1482629885
Profit before impairment197-16991140
Impairment on loans, guarantees etc.55000
Pre tax profit192-21991140
Taxes46    
Profit after tax146    
      
      
Result - 30.09.2016GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Net interest income809-293255130
Other operating income23688647113
Total income1 0455938958413
Operating costs443838526114
Profit before impairment602-24304323-1
Impairment on loans, guarantees etc.05-1-40
Pre tax profit602-29305327-1
Taxes141    
Profit after tax461    
      
      
Key figures - 30.09.2016GroupEliminations/ otherCorporateRetail 1)Real estate brokerage
Loans to customers 1)51 75388515 19435 6740
Deposits from customers 1)32 35055511 99419 8010
Guarantee liabilities1 64201 63480
The deposit-to-loan ratio62.562.778.955.50.0
Man-years3781525415814
      
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 incomeQ3 2017Q3 2016
Net interest income6861
Other operating income-31
Total income6562
Operating costs98
Profit before impairment on loans5654
Impairment on loans, guarantees etc.00
Pre tax profit5654
Taxes1413
Profit after tax4241
   
   
Statement of income30.09.201730.09.2016
Net interest income186183
Other operating income-146
Total income172189
Operating costs2825
Profit before impairment on loans144164
Impairment on loans, guarantees etc.00
Pre tax profit144164
Taxes3641
Profit after tax108123
   
   
Statement of financial position30.09.201730.09.2016
Loans to and receivables from customers20 83818 005
Total equity1 6111 476
 

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 BANK30.09.201730.09.201631.12.2016
Statement of income   
Interest and credit commission income from subsidiaries241727
Received dividend and group contribution from subsidiaries156176176
Rent paid to Sparebankeiendom AS121216
Administration fee received from Møre Boligkreditt AS222026
    
Statement of financial position   
Claims on subsidiaries1 2961 6471 270
Covered bonds01592 186
Liabilities to subsidiaries20749284
Accumulated loan portfolio transferred to Møre Boligkreditt AS20 84318 00919 815
 

Note 10

EC Capital

The 20 largest EC holders in Sparebanken Møre as at 30.09.2017Number of ECsPercentage share of EC capital
Sparebankstiftelsen Tingvoll988 1649.99
Cape Invest AS637 2476.45
Verdipapirfond Pareto Aksje Norge392 2493.97
Wenaasgruppen AS380 0003.84
MP Pensjon376 6983.81
Verdipapirfond Nordea Norge Verdi336 0143.40
Pareto AS305 1893.09
Wenaas Kapital AS230 1612.33
FLPS - Princ All Sec218 7342.21
Beka Holding AS150 1001.52
Verdipapirfondet Eika egenkapital144 2171.46
Lapas AS (Leif-Arne Langøy)113 5001.15
Fondsfinans Norge100 0001.01
Verdipapirfondet Landkreditt Utbytte100 0001.01
PIBCO AS75 0000.76
Odd Slyngstad65 2150.66
Forsvarets personell pensjonskasse63 6600.64
Stiftelsen Kjell Holm61 6860.62
Sparebanken Møre55 8510.56
Malme AS55 0000.56
Total 20 largest4 848 68549.04
Total9 886 954100.00
 

Note 11

Capital adequacy

 30.09.201730.09.201631.12.2016
Core Capital   
EC capital989989989
- ECs owned by the Bank-6-7-3
Share premium354354354
Additional Tier 1 capital34900
Primary capital fund2 3422 1862 346
Gift fund125125125
Dividend equalisation fund1 0919371 092
Value adjustment fund518251
Proposed dividend for the EC holders00138
Proposed dividend for the local community00141
Other equity203229208
Accumulated profit for the period4064200
Total equity5 9045 3155 441
Goodwill and intangible assets-44-51-47
Value adjustments of financial instruments at fair value-13-14-14
Value adjustment fund-51-82-51
Perpetual Hybrid Tier 1 capital589803800
Expected losses exceeding actual losses, IRB portfolios-146-81-219
Proposed dividend for the EC holders00-138
Proposed dividend for the local community00-141
Accumulated profit for the period-406-4200
Total core capital5 8335 4705 630
Common equity Tier 1 Capital4 8954 6674 830
    
Supplementary capital   
Subordinated loan capital of limited duration702501502
36 % addition for net unrealised gains on shares available for sale000
50 % deduction for equity in other financial institutions000
Total supplementary capital702501502
Net equity and subordinated loan capital6 5355 9716 132
    
Capital requirement by exposure classes   
    
Exposure classes SA - credit risk30.09.201730.09.201631.12.2016
Central governments or central banks000
Regional governments or local authorities163214
Public sector companies211917
Institutions (banks etc)454946
Companies (corporate customers)000
Mass marked (retail banking customers)000
Secured by mortgage on immovable property000
Exposures in default000
Covered bonds201820
Equity788
Other items121124121
Total capital requirements - credit risk, The Standardised Approach230250226
    
Exposure classes IRB - credit risk30.09.201730.09.201631.12.2016
Retail - Secured by real estate655600602
Retail - Other474746
SME641619629
Specialised lending501390415
Other corporate lending290284465
IRB-F capital requirements2 1341 9402 157
Total capital requirements - credit risk2 3642 1902 383
    
Exposure classes SA - market risk30.09.201730.09.201631.12.2016
Debt000
Equity000
Foreign exchange000
Credit value adjustment risk (CVA)283429
Total capital requirements - market risk283429
    
Operational Risk (Basic Indicator Approach)200194194
Deductions from the capital requirement000
Total capital requirement less transitional rules2 5922 4182 606
Additional capital requirements from transitional rules 1)22720335
Total capital requirements2 8192 6212 641
    
Total risk-weighted assets less transitional rules32 39230 22332 553
Total risk-weighted assets from transitional rules2 8332 537455
Total risk-weighted assets35 22532 76033 008
Minimum requirement common equity Tier 1 capital (4.5 %)1 5851 4741 483
    
Buffer Requirement30.09.201730.09.201631.12.2016
Capital conservation buffer (2.5 %)881819825
Systemic risk buffer (3.0 %)1 057983990
Countercyclical buffer (1.5%)528491495
Total buffer requirements2 4662 2932 310
Available common equity Tier 1 capital after buffer requirements8449001 037
    
Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules30.09.201730.09.201631.12.2016
Capital adequacy ratio18.618.218.6
Capital adequacy ratio incl. 50 per cent of the profit for the period19.118.8 
Core capital ratio16.616.717.0
Core capital ratio incl. 50 per cent of the profit for the period17.117.3 
Core Tier 1 capital ratio13.914.314.6
Core Tier 1 capital ratio incl. 50 per cent of the profit for the period14.514.9 
    
Leverage Ratio (LR)30.09.201730.09.201631.12.2016
Leverage Ratio8.27.88.5
Leverage Ratio incl. 50 per cent of the profit for the period8.58.18.5