Notes - Unaudited Interim Report 1 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 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

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GROUP	Loans
Broken down according to sectors	31.03.2015	31.03.2014	31.12.2014
Agriculture and forestry	427	472	463
Fisheries	3 297	2 960	3 279
Manufacturing	2 343	1 766	2 217
Building and construction	660	685	603
Wholesale and retail trade, hotels	626	632	577
Foreign shipping/supply	1 514	1 120	1 610
Property management	6 251	5 691	5 637
Professional/financial services	985	719	787
Transport and private/public services	1 378	1 223	1 311
Public entities	44	52	38
Activities abroad	127	131	135
Miscellaneous	186	115	160
Total corporate/public entities	17 838	15 566	16 817
Retail customers	32 806	30 704	32 245
Accrued interest income	125	112	129
Total loans	50 769	46 382	49 191
Individual impairment	-139	-170	-141
Collective impairment	-176	-140	-166
Loans to and receivables from customers	50 454	46 072	48 884
Loans with floating interest rate (amortised cost)	45 780	41 872	45 250
Loans with fixed interest rate (fair value)	4 674	4 200	3 941


GROUP	Deposits
Broken down according to sectors	31.03.2015	31.03.2014	31.12.2014
Agriculture and forestry	182	173	163
Fisheries	429	347	457
Manufacturing	1 057	1 255	1 138
Building and construction	450	583	484
Wholesale and retail trade, hotels	658	600	688
Foreign shipping/supply	584	673	311
Property management	1 593	1 449	1 597
Professional/financial services	1 372	1 767	1 370
Transport and private/public services	1 586	1 865	2 009
Public entities	755	826	697
Activities abroad	8	4	10
Miscellaneous	2 617	2 617	2 434
Total corporate/public entities	11 291	12 159	11 358
Retail customers	17 072	16 125	17 024
Accrued interest costs	114	150	7
Total deposits	28 477	28 434	28 389
Deposits with floating interest rate (amortised cost)	27 957	27 971	27 950
Deposits with fixed interest rate (fair value)	520	463	439

Note 3

Losses and impairment on loans and guarantees

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	31.03.2015	31.03.2014	31.12.2014
Specification of losses on loans, guarantees etc.
Changes in individual impairment of loans and guarantees during the period	-4	4	-25
Changes in collective impairment during the period	10	0	26
Confirmed losses during the period where individual impairment had previously been made	3	4	20
Confirmed losses during the period where individual impairment had previously not been made	1	1	19
Recoveries	2	3	18
Losses on loans, guarantees etc.	8	6	22

Individual impairment on loans
	31.03.2015	31.03.2014	31.12.2014
Individual impairment on loans as at 01.01	141	166	166
Confirmed losses during the period, where individual impairment had previously been made	3	4	20
Increase in individual impairment during the period	3	1	7
Individual impairment of new commitments during the period	8	11	29
Recoveries on individual impairment during the period	10	4	41
Individual impairment on loans at the end of the period	139	170	141

Collective impairment on loans
	31.03.2015	31.03.2014	31.12.2014
Collective impairment of loans as at 01.01	166	140	140
Changes during the period	10	0	26
Collective impairment on loans at the end of the period	176	140	166

Individual impairment on guarantees
	31.03.2015	31.03.2014	31.12.2014
Individual impairment as at 01.01	2	2	2
Individual impairment during the period	0	0	0
Recoveries on individual impairment during the period	1	0	0
Individual impairment at the end of the period	1	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)
	31.03.2015			31.03.2014			31.12.2014
Problem loans prior to individual impairment:
Commitments in default above 3 months	90	54	36	132	66	66	86	47	39
Other bad and doubtful commitments subject to impairment	300	30	270	425	35	390	306	37	269
Total problem loans prior to individual impairment	390	84	306	557	101	456	392	84	308
Individual impairment on:
Commitments in default above 3 months	22	8	14	29	9	20	21	8	13
Other bad and doubtful commitments subject to impairment	118	13	105	141	12	129	122	12	110
Total individual impairment	140	21	119	170	21	149	143	20	123
Problem loans after individual impairment:
Commitments in default above 3 months	68	46	22	103	57	46	65	39	26
Other bad and doubtful commitments subject to impairment	182	17	165	284	23	261	184	25	159
Total problem loans less individual impairment	250	63	187	387	80	307	249	64	185

Total problem loans prior to individual impairment as a percentage of total loans	0.77	0.26	1.71	1.21	0.33	2.93	0.80	0.26	1.83
Total problem loans less individual impairment as a percentage of total loans	0.50	0.19	1.05	0.84	0.26	1.97	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 the debt.

GROUP - Q1 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			126
Loans to and receivables from credit institutions			949
Loans to and receivables from customers		4 827	45 627
Certificates and bonds		4 627
Shares	2			121
Financial derivatives	1 009
Total financial assets	1 011	9 454	46 702	121
Loans and deposits from credit institutions			569
Deposits from and liabilities to customers		516	27 961
Financial derivatives	639
Debt securities			21 625
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 384
Total financial liabilities	639	516	51 539	-

GROUP - Q1 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			822
Loans to and receivables from credit institutions			561
Loans to and receivables from customers		4 315	41 757
Certificates and bonds		5 624
Shares	2			290
Financial derivatives	486
Total financial assets	488	9 939	43 140	290
Loans and deposits from credit institutions			329
Deposits from and liabilities to customers		464	27 970
Financial derivatives	262
Debt securities		405	18 183
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 528
Total financial liabilities	262	869	48 010	-

	31.03.2015	31.03.2014	31.12.2014
Net gains/losses on financial instruments
Certificates and bonds	-8	4	10
Securities	0	0	92
Foreign exchange trading (for customers)	7	6	27
Fixed income trading (for customers)	11	2	8
Financial derivatives	10	1	-9
Net change in value and gains/losses from financial instruments	20	13	128

Note 6

Financial instruments at amortisied cost

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GROUP	31.03.2015		31.03.2014
	Fair value	Book value	Fair value	Book value
Cash and claims on Norges Bank	126	126	822	822
Loans to and receivables from credit institutions	949	949	561	561
Loans to and receivables from customers	45 627	45 627	41 757	41 757
Total financial assets	46 702	46 702	43 140	43 140
Loans and deposits from credit institutions	569	569	329	329
Deposits from and liabilities to customers	27 961	27 961	27 970	27 970
Debt securities	21 649	21 625	18 344	18 183
Subordinated loan capital and Perpetual Hybrid Tier 1 capital	1 464	1 384	1 625	1 528
Total financial liabilities	51 643	51 539	48 268	48 010

GROUP - Q1 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	126			126
Loans to and receivables from credit institutions		949		949
Loans to and receivables from customers			45 627	45 627
Total financial assets	126	949	45 627	46 702
Loans and deposits from credit institutions		569		569
Deposits from and liabilities to customers			27 961	27 961
Debt securities		21 649		21 649
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 464		1 464
Total financial liabilities	-	23 682	27 961	51 643

GROUP - Q1 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	822			822
Loans to and receivables from credit institutions		561		561
Loans to and receivables from customers			41 757	41 757
Total financial assets	822	561	41 757	43 140
Loans and deposits from credit institutions		329		329
Deposits from and liabilities to customers			27 970	27 970
Debt securities		18 344		18 344
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 625		1 625
Total financial liabilities	-	20 298	27 970	48 268

Note 7

Financial instruments at fair value

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GROUP - Q1 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			4 827	4 827
Certificates and bonds	1 681	2 946		4 627
Shares	2		121	123
Financial derivatives		1 009		1 009
Total financial assets	1 683	3 955	4 948	10 586
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			516	516
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		639		639
Total financial liabilities	-	639	516	1 155


GROUP - Q1 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			4 315	4 315
Certificates and bonds	1 808	3 816		5 624
Shares	2		290	292
Financial derivatives		486		486
Total financial assets	1 810	4 302	4 605	10 717
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			464	464
Debt securities		405		405
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		262		262
Total financial liabilities	-	667	464	1 131

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	1 016		98
Sales/reduction	312		24
Transferred to Level 3
Transferred from Level 3
Net gains/losses recorded in the period		7
Recorded value as at 31.03.15	4 827	121	516


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	58	1	14
Sales/reduction	65	-	76
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses recorded in the period	-116	95	-
Recorded value as at 31.03.14	4 315	290	464

Note 8

Operating segments

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Result - Q1 2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	273	3	115	155	0
Other operating income	67	15	21	26	5
Total income	340	18	136	181	5
Operating costs	147	26	28	88	5
Profit before impairment	193	-8	108	93	0
Impairment on loans, guarantees etc.	8	10	-2	0	0
Pre tax profit	185	-18	110	93	0
Taxes	50
Profit after tax	135


Statement of financial position - 31.03.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	50 454	1 067	17 338	32 049	0
Deposits from customers 1)	28 477	694	9 470	18 313	0
Guarantee liabilities	1 652	0	1 643	9	0
The deposit-to-loan ratio	56.4	65.0	54.6	57.1	0
Man-years	380	150	53	161	16


Result - Q1 2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	269	1	116	152	0
Other operating income	60	16	18	21	5
Total income	329	17	134	173	5
Operating costs	143	23	28	87	5
Profit before impairment	186	-6	106	86	0
Impairment on loans, guarantees etc.	6	0	7	-1	0
Pre tax profit	180	-6	99	87	0
Taxes	48
Profit after tax	132


Statement of financial position - 31.03.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	46 072	1 017	15 127	29 928	0
Deposits from customers 1)	28 434	889	10 404	17 141	0
Guarantee liabilities	1 292	0	1 283	9	0
The deposit-to-loan ratio	61.5	0.0	68.8	57.3	0
Man-years	382	148	57	161	18

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	31.03.2015	31.03.2014
	MØRE BOLIGKREDITT AS
Net interest income	75	76
Other operating income	8	-4
Total income	83	72
Operating costs	7	7
Profit before impairment on loans	76	65
Impairment on loans, guarantees etc.	0	0
Pre tax profit	76	65
Taxes	21	17
Profit after tax	55	48


Statement of financial position	31.03.2015	31.03.2014
Loans to and receivables from customers	15 772	14 700

Note 9

Transactions with related parties

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PARENT BANK	31.03.2015	31.03.2014	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	6	10	34
Received dividend and group contribution from subsidiaries	191	152	152
Rent paid to Sparebankeiendom AS	4	4	17
Administration fee received from Møre Boligkreditt AS	6	5	22

Statement of financial position
Claims on subsidiaries	1 318	1 324	1 069
Covered bonds	195	10	25
Liabilities to subsidiaries	582	121	122
Accumulated loan portfolio transferred to Møre Boligkreditt AS	15 774	14 701	15 544

Note 10

EC capital

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The 20 largest EC holders in Sparebanken Møre as at 31.03.2015	Number of ECs	Percentage share of EC capital
Sparebankstiftelsen Tingvoll	945 000	9.56
MP Pensjon	450 282	4.55
Verdipapirfond Pareto Aksje Norge	370 015	3.74
VPF Nordea Norge Verdi	327 073	3.31
Pareto AS	305 189	3.09
Wenaasgruppen AS	250 000	2.53
FLPS - Princ All Sec	239 934	2.43
Verdipapirfond Pareto Aktiv	214 838	2.17
Bergen Kommunale Pensjonskasse	200 000	2.02
VPF Fondsfinans Spar	200 000	2.02
Beka Holding AS	150 100	1.52
Verdipapirfondet Eika utbytte	137 197	1.39
Farstad Shipping ASA	126 909	1.28
Lapas AS (Leif-Arne Langøy)	105 500	1.07
Sparebanken Møre	104 416	1.06
Pareto Verdi Verdipapirfond	101 786	1.03
Odd Slyngstad	84 773	0.86
Andvord AS	68 750	0.70
Stiftelsen Kjell Holm	62 354	0.63
Forsvarets Personellservice	53 960	0.55
Total 20 largest	4 498 076	45.50
Total	9 886 954	100.00

Note 11

Capital adequacy

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	31.03.2015	31.03.2014	31.12.2014
EC capital	989	989	989
- ECs owned by the Bank	-11	-10	-11
Share premium fund	354	353	353
Dividend equalisation fund	799	682	799
Gift fund	125	125	125
Primary capital fund	2 049	1 931	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
Accumulated profit for the period	132	209	0
Total equity	4 709	4 521	4 844
Deferred tax, goodwill and intangible assets	-20	-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	807	1 000	860
Deduction for overfunded pension liability	0	-70	0
Expected losses exceeding actual losses, IRB portfolios corporate	-259	0	-193
Proposed dividend for the EC holders	0	0	-133
Proposed dividend for the local community	0	0	-136
Accumulated profit for the period	-132	-209	0
Total core capital	5 059	5 162	5 176
Common equity Tier 1 Capital	4 252	4 162	4 316

Supplementary capital
Subordinated loan capital of limited duration	525	499	501
36 % addition for net unrealised gains on shares available for sale	0	12	12
50 % deduction for equity in other financial institutions	0	0	0
Total supplementary capital	525	511	513
Net equity and subordinated loan capital	5 584	5 673	5 689


Exposure classes SA - credit risk
Central governments or central banks	0	0	0
Regional governments or local authorities	5	6	4
Public sector companies	20	22	21
Institutions (banks etc)	45	36	51
Companies (corporate customers)	31	786	33
Mass marked (retail banking customers)	-	271	26
Secured by mortgage on immovable property	-	1 245	976
Exposures in default	4	11	3
Covered bonds	14	19	13
Equity	6	6	6
Other items	84	96	81
Total capital requirements - credit risk, The Standardised Approach	209	2 498	1 214

Exposure classes IRB - credit risk
Retail - Secured by real estate	528	-	-
Retail - Other	65	-	-
SME	847	-	854
Specialised lending	490	-	440
Other corporate lending	196	-	174
IRB-F capital requirements	2 126	0	1 468
Total capital requirements - credit risk	2 335	2 498	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)	20	0	21
Total capital requirements - market risk	20	0	21
Operational Risk (Basic Indicator Approach)	190	179	179
Deductions from the capital requirement	0	-14	-14
Total capital requirement less transitional rules	2 545	2 663	2 868
Additional capital requirements from transitional rules 1)	0	0	0
Total capital requirements	2 545	2 663	2 868

Risk-weighted assets (calculation basis for capital adequacy ratio)
Risk-weighted assets less transitional rules	31 787	33 280	36 036
Additional RWA from transitional rules 1)	0	0	0
Total risk-weighted assets	31 787	33 280	36 036
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 requirements	1 748	-	1 981
Available common equity Tier 1 capital after buffer requirements	1 073	-	713

Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules
Capital adequacy ratio	17.6	17.0	15.8
Capital adequacy ratio incl. 50 per cent of the profit for the period	17.8	17.4
Core capital ratio	15.9	15.5	14.4
Core capital ratio incl. 50 per cent of the profit for the period	16.1	15.8
Core Tier 1 capital ratio	13.4	12.5	12.0
Core Tier 1 capital ratio incl. 50 per cent of the profit for the period	13.6	12.8

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.