Notes - Unaudited Interim Report 3 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 September 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	30.09.2015	30.09.2014	31.12.2014
Agriculture and forestry	395	465	463
Fisheries	3 316	3 339	3 279
Manufacturing	1 942	1 676	2 217
Building and construction	711	644	603
Wholesale and retail trade, hotels	539	632	577
Foreign shipping/supply	1 615	1 094	1 610
Property management	6 109	5 533	5 637
Professional/financial services	1 065	606	787
Transport and private/public services	1 297	1 835	1 311
Public entities	16	36	38
Activities abroad	133	125	135
Miscellaneous	191	137	160
Total corporate/public entities	17 329	16 122	16 817
Retail customers	34 299	31 547	32 245
Accrued interest income	112	106	129
Total loans	51 740	47 775	49 191
Individual impairment	-84	-157	-141
Collective impairment	-237	-149	-166
Loans to and receivables from customers	51 419	47 469	48 884
Loans with floating interest rate (amortised cost)	46 244	43 586	45 250
Loans with fixed interest rate (fair value)	5 496	4 189	3 941


GROUP	Deposits
Broken down according to sectors	30.09.2015	30.09.2014	31.12.2014
Agriculture and forestry	200	189	163
Fisheries	412	345	457
Manufacturing	1 046	1 130	1 138
Building and construction	445	502	484
Wholesale and retail trade, hotels	762	641	688
Foreign shipping/supply	525	565	311
Property management	1 416	1 360	1 597
Professional/financial services	1 587	1 765	1 370
Transport and private/public services	2 278	1 868	2 009
Public entities	850	722	697
Activities abroad	5	8	10
Miscellaneous	1 877	2 402	2 434
Total corporate/public entities	11 403	11 497	11 358
Retail customers	17 607	16 655	17 024
Accrued interest costs	276	398	7
Total deposits	29 286	28 550	28 389
Deposits with floating interest rate (amortised cost)	28 933	28 123	27 950
Deposits with fixed interest rate (fair value)	353	427	439

Note 3

Losses and impairment on loans and guarantees

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	Q3 2015	Q3 2014	30.09.2015	30.09.2014	31.12.2014
Specification of losses on loans, guarantees etc.
Changes in individual impairment of loans and guarantees during the period	-28	-3	-57	-11	-25
Changes in collective impairment during the period	36	5	71	9	26
Confirmed losses during the period where individual impairment had previously been made	8	4	15	19	20
Confirmed losses during the period where individual impairment had previously not been made	-5	4	4	11	19
Recoveries	1	9	8	13	18
Losses on loans, guarantees etc.	10	1	25	15	22


Individual impairment on loans
	Q3 2015	Q3 2014	30.09.2015	30.09.2014	31.12.2014
Individual impairment on loans as at 01.01/01.07	111	162	141	166	166
Confirmed losses during the period, where individual impairment had previously been made	6	4	15	19	20
Increase in individual impairment during the period	1	1	5	7	7
Individual impairment of new commitments during the period	4	8	20	28	29
Recoveries on individual impairment during the period	26	10	67	25	41
Individual impairment on loans at the end of the period	84	157	84	157	141


Collective impairment on loans
	Q3 2015	Q3 2014	30.09.2015	30.09.2014	31.12.2014
Collective impairment of loans as at 01.01/01.07	201	144	166	140	140
Changes during the period	36	5	71	9	26
Collective impairment on loans at the end of the period	237	149	237	149	166


Individual impairment on guarantees
	Q3 2015	Q3 2014	30.09.2015	30.09.2014	31.12.2014
Individual impairment as at 01.01/01.07	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)
	30.09.2015			30.09.2014			31.12.2014
Problem loans prior to individual impairment:
Commitments in default above 3 months	82	50	32	88	57	31	86	47	39
Other bad and doubtful commitments subject to impairment	153	34	119	423	33	390	306	37	269
Total problem loans prior to individual impairment	235	84	151	511	90	421	392	84	308
Individual impairment on:
Commitments in default above 3 months	17	7	10	21	8	13	21	8	13
Other bad and doubtful commitments subject to impairment	69	12	57	136	10	126	122	12	110
Total individual impairment	86	19	67	157	18	139	143	20	123
Problem loans after individual impairment:
Commitments in default above 3 months	65	43	22	67	49	18	65	39	26
Other bad and doubtful commitments subject to impairment	84	22	62	287	23	264	184	25	159
Total problem loans less individual impairment	149	65	84	354	72	282	249	64	185

Total problem loans prior to individual impairment as a percentage of total loans	0.46	0.24	0.88	1.08	0.29	2.63	0.80	0.26	1.83
Total problem loans less individual impairment as a percentage of total loans	0.29	0.19	0.49	0.74	0.23	1.75	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 - 30.09.2015	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			583
Loans to and receivables from credit institutions			1 170
Loans to and receivables from customers		5 496	45 923
Certificates and bonds		4 674
Shares	3			120
Financial derivatives	1 178
Total financial assets	1 181	10 170	47 676	120
Loans and deposits from credit institutions			1 090
Deposits from and liabilities to customers		353	28 933
Financial derivatives	623
Debt securities			21 721
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 320
Total financial liabilities	623	353	53 064	-

GROUP - 30.09.2014	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			699
Loans to and receivables from credit institutions			605
Loans to and receivables from customers		4 189	43 280
Certificates and bonds		5 371
Shares	2			133
Financial derivatives	594
Total financial assets	596	9 560	44 584	133
Loans and deposits from credit institutions			583
Deposits from and liabilities to customers		427	28 123
Financial derivatives	497
Debt securities			18 973
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 365
Total financial liabilities	497	427	49 044	-

	Q3 2015	Q3 2014	30.09.2015	30.09.2014	31.12.2014
Net gains/losses on financial instruments
Certificates and bonds	-32	3	-41	12	10
Securities	-1	94	0	93	92
Foreign exchange trading (for customers)	9	6	24	18	27
Fixed income trading (for customers)	6	2	23	5	8
Financial derivatives	-1	0	8	7	-9
Net change in value and gains/losses from financial instruments	-19	105	14	135	128

Note 6

Financial instruments at amortised cost

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GROUP	30.09.2015		30.09.2014
	Fair value	Book value	Fair value	Book value
Cash and claims on Norges Bank	583	583	699	699
Loans to and receivables from credit institutions	1 170	1 170	605	605
Loans to and receivables from customers	45 923	45 923	43 280	43 280
Total financial assets	47 676	47 676	44 584	44 584
Loans and deposits from credit institutions	1 090	1 090	583	583
Deposits from and liabilities to customers	28 933	28 933	28 123	28 123
Debt securities	21 627	21 721	19 157	18 973
Subordinated loan capital and Perpetual Hybrid Tier 1 capital	1 372	1 320	1 476	1 365
Total financial liabilities	53 022	53 064	49 339	49 044

GROUP - 30.09.2015	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	583			583
Loans to and receivables from credit institutions		1 170		1 170
Loans to and receivables from customers			45 923	45 923
Total financial assets	583	1 170	45 923	47 676
Loans and deposits from credit institutions		1 090		1 090
Deposits from and liabilities to customers			28 933	28 933
Debt securities		21 627		21 627
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 372		1 372
Total financial liabilities	-	24 089	28 933	53 022

GROUP - 30.09.2014	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	699			699
Loans to and receivables from credit institutions		605		605
Loans to and receivables from customers			43 280	43 280
Total financial assets	699	605	43 280	44 584
Loans and deposits from credit institutions		583		583
Deposits from and liabilities to customers			28 123	28 123
Debt securities		19 157		19 157
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 476		1 476
Total financial liabilities	-	21 216	28 123	49 339

Note 7

Financial instruments at fair value

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GROUP - 30.09.2015	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			5 496	5 496
Certificates and bonds	1 739	2 935		4 674
Shares	8		115	123
Financial derivatives		1 178		1 178
Total financial assets	1 747	4 113	5 611	11 471
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			353	353
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		623		623
Total financial liabilities	-	623	353	976


GROUP - 30.09.2014	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			4 189	4 189
Certificates and bonds	1 693	3 678		5 371
Shares	15		120	135
Financial derivatives		594		594
Total financial assets	1 708	4 272	4 309	10 289
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			427	427
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		497		497
Total financial liabilities	-	497	427	924

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	2 592	-	146
Sales/reduction	1 227	2	235
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses recorded in the period	8	3	-
Recorded value as at 30.09.15	5 496	115	353


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	253	1	89
Sales/reduction	526	166	188
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses recorded in the period	24	91	-
Recorded value as at 30.09.14	4 189	120	427

Note 8

Operating segments

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Result - Q3 2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	277	-9	120	166	0
Other operating income	33	-28	24	32	5
Total income	310	-37	144	198	5
Operating costs	146	21	31	90	4
Profit before impairment	164	-58	113	108	1
Impairment on loans, guarantees etc.	10	38	-26	-2	0
Pre tax profit	154	-96	139	110	1
Taxes	43
Profit after tax	111


Result - 30.09.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	819	-10	351	478	0
Other operating income	165	-2	69	82	16
Total income	984	-12	420	560	16
Operating costs	437	75	85	263	14
Profit before impairment	547	-87	335	297	2
Impairment on loans, guarantees etc.	25	71	-44	-2	0
Pre tax profit	522	-158	379	299	2
Taxes	142
Profit after tax	380


Statement of financial position - 30.09.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	51 419	1 047	16 872	33 500	0
Deposits from customers 1)	29 286	1 061	9 361	18 864	0
Guarantee liabilities	1 708	0	1 700	8	0
The deposit-to-loan ratio	57.0	101.3	55.5	56.3	0
Man-years	388	154	55	164	15


Result - Q3 2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	274	5	118	151	0
Other operating income	152	103	18	26	5
Total income	426	108	136	177	5
Operating costs	141	7	33	96	5
Profit before impairment	285	101	103	81	0
Impairment on loans, guarantees etc.	1	5	-1	-3	0
Pre tax profit	284	96	104	84	0
Taxes	51
Profit after tax	233


Result - 30.09.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	811	11	350	450	0
Other operating income	274	135	53	70	16
Total income	1 085	146	403	520	16
Operating costs	428	78	82	252	16
Profit before impairment	657	68	321	268	0
Impairment on loans, guarantees etc.	15	9	11	-5	0
Pre tax profit	642	59	310	273	0
Taxes	146
Profit after tax	496


Statement of financial position - 30.09.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	47 469	1 018	15 623	30 828	0
Deposits from customers 1)	28 550	773	10 009	17 768	0
Guarantee liabilities	1 546	0	1 538	8	0
The deposit-to-loan ratio	60.1	41.1	64.1	57.6	0
Man-years	386	151	54	164	17

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	Q3 2015	Q3 2014
	MØRE BOLIGKREDITT AS
Net interest income	66	72
Other operating income	-3	1
Total income	63	73
Operating costs	7	6
Profit before impairment on loans	56	67
Impairment on loans, guarantees etc.	0	0
Pre tax profit	56	67
Taxes	15	18
Profit after tax	41	49


	MØRE BOLIGKREDITT AS
Statement of income	30.09.2015	30.09.2014
Net interest income	208	221
Other operating income	4	-2
Total income	212	219
Operating costs	23	21
Profit before impairment on loans	189	198
Impairment on loans, guarantees etc.	2	1
Pre tax profit	187	197
Taxes	50	53
Profit after tax	137	144


Statement of financial position	30.09.2015	30.09.2014
Loans to and receivables from customers	16 940	16 141

Note 9

Transactions with related parties

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PARENT BANK	30.09.2015	30.09.2014	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	16	27	34
Received dividend and group contribution from subsidiaries	191	152	152
Rent paid to Sparebankeiendom AS	13	13	17
Administration fee received from Møre Boligkreditt AS	18	17	22

Statement of financial position
Claims on subsidiaries	1 612	1 052	1 069
Covered bonds	238	1 083	25
Liabilities to subsidiaries	1 091	222	122
Accumulated loan portfolio transferred to Møre Boligkreditt AS	16 944	16 143	15 546

Note 10

EC capital

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The 20 largest EC holders in Sparebanken Møre as at 30.09.2015	Number of ECs	Percentage share of EC capital
Sparebankstiftelsen Tingvoll	984 000	9.95
Verdipapirfond Pareto Aksje Norge	608 761	6.16
MP Pensjon	430 282	4.35
VPF Nordea Norge Verdi	327 073	3.31
Wenaasgruppen AS	321 351	3.25
Pareto AS	305 189	3.09
FLPS - Princ All Sec	230 934	2.34
Bergen Kommunale Pensjonskasse	210 000	2.12
VPF Fondsfinans Norge	158 138	1.60
Sparebanken Møre	156 699	1.58
Beka Holding AS	150 100	1.52
Farstad Shipping ASA	126 909	1.28
Lapas AS (Leif-Arne Langøy)	105 500	1.07
Odd Slyngstad	84 773	0.86
Verdipapirfondet Eika utbytte	79 887	0.81
Andvord AS	71 400	0.72
Stiftelsen Kjell Holm	59 800	0.60
Forsvarets Personellservice	59 660	0.60
Sparebanken Vest	59 450	0.60
Verdipapirfondet Landkreditt utbytte	55 000	0.56
Total 20 largest	4 584 906	46.37
Total	9 886 954	100.00

Note 11

Capital Adequacy

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	30.09.2015	30.09.2014	31.12.2014
EC capital	989	989	989
- ECs owned by the Bank	-16	-4	-11
Share premium	354	353	353
Dividend equalisation fund	799	684	799
Gift fund	125	125	125
Primary capital fund	2 043	1 935	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	378	488	0
Total equity	4 944	4 812	4 844
Deferred tax, goodwill and intangible assets	-47	-29	-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	810	804	860
Deduction for overfunded pension liability	0	-70	0
Expected losses exceeding actual losses, IRB portfolios corporate	-229	-178	-193
Proposed dividend for the EC holders	0	0	-133
Proposed dividend for the local community	0	0	-136
Total comprehensive income after tax	-378	-488	0
Total core capital	5 054	4 790	5 176
Common equity Tier 1 Capital	4 244	3 986	4 316

Supplementary capital
Subordinated loan capital of limited duration	501	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	501	505	513
Net equity and subordinated loan capital	5 555	5 295	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	6	6	4
Public sector companies	20	23	21
Institutions (banks etc)	52	51	51
Companies (corporate customers)	27	34	33
Mass marked (retail banking customers)	0	0	26
Secured by mortgage on immovable property	0	1 064	976
Exposures in default	0	13	3
Covered bonds	15	13	13
Equity	8	6	6
Other items	98	52	81
Total capital requirements - credit risk, The Standardised Approach	226	1 262	1 214

Exposure classes IRB - credit risk
Retail - Secured by real estate	588	-	-
Retail - Other	45	-	-
SME	898	765	854
Specialised lending	513	414	440
Other corporate lending	197	176	174
IRB-F capital requirements	2 241	1 355	1 468
Total capital requirements - credit risk	2 467	2 617	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	180	179
Deductions from the capital requirement	0	-14	-14
Total capital requirement less transitional rules	2 677	2 783	2 868
Additional capital requirements from transitional rules 1)	0	0	0
Total capital requirements	2 677	2 783	2 868

Risk-weighted assets (calculation basis for capital adequacy ratio)
Risk-weighted assets less transitional rules	33 460	34 950	36 036
Additional RWA from transitional rules 1)	0	0	0
Total risk-weighted assets	33 460	34 950	36 036
Minimum requirement common equity Tier 1 capital (4.5 %)	1 506	-	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 %)	837	-	900
Systemic risk buffer (3.0 %)	1 004	-	1 081
Total buffer requirements	1 840	-	1 981
Available common equity Tier 1 capital after buffer requirements	898	-	713

Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules
Capital adequacy ratio	16.6	15.2	15.8
Capital adequacy ratio incl. 50 per cent of the profit for the period	17.2	15.9
Core capital ratio	15.1	13.7	14.4
Core capital ratio incl. 50 per cent of the profit for the period	15.7	14.4
Core Tier 1 capital ratio	12.7	11.4	12.0
Core Tier 1 capital ratio incl. 50 per cent of the profit for the period	13.3	12.1

Sparebanken Møre's capital requirements at 30th September 2015 are based on IRB-Foundation for corporate commitments and IRB-Retail for retail commitments.