Notes - Unaudited Interim Report 4 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 December 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. IFRIC 21 Levies was effective from 2015. This interpretation does not affect the accrual in the annual financial statements. Otherwise, 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	31.12.2015	31.12.2014
Agriculture and forestry	369	463
Fisheries	3 313	3 279
Manufacturing	1 755	2 217
Building and construction	595	603
Wholesale and retail trade, hotels	507	577
Foreign shipping/supply	1 189	1 610
Property management	6 133	5 637
Professional/financial services	892	787
Transport and private/public services	1 639	1 311
Public entities	2	38
Activities abroad	132	135
Miscellaneous	180	160
Total corporate/public entities	16 706	16 817
Retail customers	34 822	32 245
Accrued interest income	99	129
Total loans	51 627	49 191
Individual impairment	-79	-141
Collective impairment	-262	-166
Loans to and receivables from customers	51 286	48 884
Loans with floating interest rate (amortised cost)	46 290	45 068
Loans with fixed interest rate (fair value)	5 337	4 123


GROUP	Deposits
Broken down according to sectors	31.12.2015	31.12.2014
Agriculture and forestry	176	163
Fisheries	641	457
Manufacturing	1 122	1 138
Building and construction	470	484
Wholesale and retail trade, hotels	738	688
Foreign shipping/supply	503	311
Property management	1 370	1 597
Professional/financial services	1 557	1 370
Transport and private/public services	2 335	2 009
Public entities	898	697
Activities abroad	5	10
Miscellaneous	1 751	2 434
Total corporate/public entities	11 566	11 358
Retail customers	17 815	17 024
Accrued interest costs	8	7
Total deposits	29 389	28 389
Deposits with floating interest rate (amortised cost)	28 875	27 947
Deposits with fixed interest rate (fair value)	514	442

Note 3

Losses and impairment on loans and guarantees

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	Q4 2015	Q4 2014	31.12.2015	31.12.2014
Specification of losses on loans, guarantees etc.
Changes in individual impairment of loans and guarantees during the period	-14	-14	-66	-25
Changes in collective impairment during the period	25	17	96	26
Confirmed losses during the period where individual impairment had previously been made	3	1	13	20
Confirmed losses during the period where individual impairment had previously not been made	15	8	19	19
Recoveries	4	5	12	18
Losses on loans, guarantees etc.	25	7	50	22


Individual impairment on loans
	Q4 2015	Q4 2014	31.12.2015	31.12.2014
Individual impairment on loans as at 01.01/01.10	84	157	141	166
Confirmed losses during the period, where individual impairment had previously been made	3	1	13	20
Increase in individual impairment during the period	4	0	9	7
Individual impairment of new commitments during the period	2	1	22	29
Recoveries on individual impairment during the period	8	16	80	41
Individual impairment on loans at the end of the period	79	141	79	141


Collective impairment on loans
	Q4 2015	Q4 2014	31.12.2015	31.12.2014
Collective impairment of loans as at 01.01/01.10	237	149	166	140
Changes during the period	25	17	96	26
Collective impairment on loans at the end of the period	262	166	262	166


Individual impairment on guarantees
	Q4 2015	Q4 2014	31.12.2015	31.12.2014
Individual impairment as at 01.01/01.10	2	2	2	2
Individual impairment during the period	0	0	0	0
Recoveries on individual impairment during the period	2	0	2	0
Individual impairment at the end of the period	0	2	0	2

Note 4

Defaulted and doubtful commitments

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GROUP	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)
	31.12.2015			31.12.2014
Problem loans prior to individual impairment:
Commitments in default above 3 months	72	37	35	86	47	39
Other bad and doubtful commitments subject to impairment	170	28	142	306	37	269
Total problem loans prior to individual impairment	242	65	177	392	84	308
Individual impairment on:
Commitments in default above 3 months	14	2	12	21	8	13
Other bad and doubtful commitments subject to impairment	65	10	55	122	12	110
Total individual impairment	79	12	67	143	20	123
Problem loans after individual impairment:
Commitments in default above 3 months	58	35	23	65	39	26
Other bad and doubtful commitments subject to impairment	105	18	87	184	25	159
Total problem loans less individual impairment	163	53	110	249	64	185

Total problem loans prior to individual impairment as a percentage of total loans	0.47	0.19	1.07	0.80	0.26	1.83
Total problem loans less individual impairment as a percentage of total loans	0.32	0.15	0.67	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.

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 debt.

GROUP - 31.12.2015	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			1 054
Loans to and receivables from credit institutions			1 205
Loans to and receivables from customers		5 337	45 949
Certificates and bonds		4 735
Shares and other securities	2			166
Financial derivatives	1 135
Total financial assets	1 137	10 072	48 208	166
Loans and deposits from credit institutions			1 058
Deposits from and liabilities to customers		514	28 875
Financial derivatives	592
Debt securities		1 107	20 810
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 327
Total financial liabilities	592	1 621	52 070	-

GROUP - 31.12.2014	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			78
Loans to and receivables from credit institutions			1 161
Loans to and receivables from customers		4 123	44 761
Certificates and bonds		4 771
Shares and other securities	3			123
Financial derivatives	898
Total financial assets	901	8 894	46 000	123
Loans and deposits from credit institutions			548
Deposits from and liabilities to customers		442	27 947
Financial derivatives	713
Debt securities			19 872
Subordinated loan capital and Perpetual Hybrid Tier 1 capital			1 379
Total financial liabilities	713	442	49 746	-

	Q4 2015	Q4 2014	31.12.2015	31.12.2014
Net gains/losses on financial instruments
Certificates and bonds	-10	-2	-51	10
Securities	-2	-1	-2	92
Foreign exchange trading (for customers)	9	9	33	27
Fixed income trading (for customers)	3	3	26	8
Financial derivatives	-3	-16	6	-9
Net change in value and gains/losses from financial instruments	-3	-7	12	128

Note 6

Financial instruments at amortised cost

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GROUP	31.12.2015		31.12.2014
	Fair value	Book value	Fair value	Book value
Cash and claims on Norges Bank	1 054	1 054	78	78
Loans to and receivables from credit institutions	1 205	1 205	1 161	1 161
Loans to and receivables from customers	45 949	45 949	44 761	44 761
Total financial assets	48 208	48 208	46 000	46 000
Loans and deposits from credit institutions	1 058	1 058	548	548
Deposits from and liabilities to customers	28 875	28 875	27 947	27 947
Debt securities	20 676	20 810	20 033	19 872
Subordinated loan capital and Perpetual Hybrid Tier 1 capital	1 369	1 327	1 475	1 379
Total financial liabilities	51 978	52 070	50 003	49 746

GROUP - 31.12.2015	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	1 054			1 054
Loans to and receivables from credit institutions		1 205		1 205
Loans to and receivables from customers			45 949	45 949
Total financial assets	1 054	1 205	45 949	48 208
Loans and deposits from credit institutions		1 058		1 058
Deposits from and liabilities to customers			28 875	28 875
Debt securities		20 676		20 676
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 369		1 369
Total financial liabilities	-	23 103	28 875	51 978

GROUP - 31.12.2014	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	78			78
Loans to and receivables from credit institutions		1 161		1 161
Loans to and receivables from customers			44 761	44 761
Total financial assets	78	1 161	44 761	46 000
Loans and deposits from credit institutions		548		548
Deposits from and liabilities to customers			27 947	27 947
Debt securities		20 033		20 033
Subordinated loan capital and Perpetual Hybrid Tier 1 capital		1 475		1 475
Total financial liabilities	-	22 056	27 947	50 003

Note 7

Financial instruments at fair value

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GROUP - 31.12.2015	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			5 337	5 337
Certificates and bonds	1 739	2 996		4 735
Shares and other securities	7		161	168
Financial derivatives		1 135		1 135
Total financial assets	1 746	4 131	5 498	11 375
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			514	514
Debt securities		1 107		1 107
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		592		592
Total financial liabilities	-	1 699	514	2 213


GROUP - 31.12.2014	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			4 123	4 123
Certificates and bonds	1 660	3 111		4 771
Shares and other securities	12		114	126
Financial derivatives		898		898
Total financial assets	1 672	4 009	4 237	9 918
Loans and deposits from credit institutions				-
Deposits from and liabilities to customers			442	442
Debt securities				-
Subordinated loan capital and Perpetual Hybrid Tier 1 capital				-
Financial derivatives		713		713
Total financial liabilities	-	713	442	1 155

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	2 505	-	335
Sales/reduction	1 291	4	263
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses in the period	-	51	-
Recorded value as at 31.12.15	5 337	161	514


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	375	1	115
Sales/reduction	734	166	200
Transferred to Level 3	-	-	-
Transferred from Level 3	-	-	-
Net gains/losses in the period	44	85	1
Recorded value as at 31.12.14	4 123	114	442

Note 8

Operating segments

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Result - Q4 2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	279	-12	117	174	0
Other operating income	40	-8	21	23	4
Total income	319	-20	138	197	4
Operating costs	124	3	32	83	6
Profit before impairment	195	-23	106	114	-2
Impairment on loans, guarantees etc.	25	24	2	-1	0
Pre tax profit	170	-47	104	115	-2
Taxes	48
Profit after tax	122


Result - 31.12.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	1 098	-22	468	652	0
Other operating income	205	-10	90	105	20
Total income	1 303	-32	558	757	20
Operating costs	561	78	117	346	20
Profit before impairment	742	-110	441	411	0
Impairment on loans, guarantees etc.	50	96	-42	-4	0
Pre tax profit	692	-206	483	415	0
Taxes	189
Profit after tax	503


Statement of financial position - 31.12.2015	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	51 286	1 007	16 245	34 034	0
Deposits from customers 1)	29 389	731	9 673	18 985	0
Guarantee liabilities	1 605	0	1 595	10	0
The deposit-to-loan ratio	57.3	72.6	59.5	55.8	0
Man-years	388	155	58	160	15


Result - Q4 2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	282	5	119	158	0
Other operating income	41	-8	19	24	6
Total income	323	-3	138	182	6
Operating costs	136	12	29	88	7
Profit before impairment	187	-15	109	94	-1
Impairment on loans, guarantees etc.	7	17	-10	0	0
Pre tax profit	180	-32	119	94	-1
Taxes	53
Profit after tax	127


Result - 31.12.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Net interest income	1 093	16	469	608	0
Other operating income	315	127	72	94	22
Total income	1 408	143	541	702	22
Operating costs	564	90	111	340	23
Profit before impairment	844	53	430	362	-1
Impairment on loans, guarantees etc.	22	26	1	-5	0
Pre tax profit	822	27	429	367	-1
Taxes	199
Profit after tax	623


Statement of financial position - 31.12.2014	Group	Eliminations/ other	Corporate	Retail 1)	Real estate brokerage
Loans to customers 1)	48 884	1 066	16 315	31 503	0
Deposits from customers 1)	28 389	480	9 606	18 303	0
Guarantee liabilities	1 660	0	1 652	8	0
The deposit-to-loan ratio	58.1	45.0	58.9	58.1	0
Man-years	383	152	53	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	Q4 2015	Q4 2014
	MØRE BOLIGKREDITT AS
Net interest income	65	77
Other operating income	-2	-5
Total income	63	72
Operating costs	8	8
Profit before impairment on loans	55	64
Impairment on loans, guarantees etc.	1	0
Pre tax profit	54	64
Taxes	15	17
Profit after tax	39	47


	MØRE BOLIGKREDITT AS
Statement of income	31.12.2015	31.12.2014
Net interest income	273	298
Other operating income	2	-7
Total income	275	291
Operating costs	31	29
Profit before impairment on loans	244	262
Impairment on loans, guarantees etc.	3	1
Pre tax profit	241	261
Taxes	65	70
Profit after tax	176	191


Statement of financial position	31.12.2015	31.12.2014
Loans to and receivables from customers	16 907	15 544

Note 9

Transactions with related parties

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PARENT BANK	31.12.2015	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	19	34
Received dividend and group contribution from subsidiaries	191	152
Rent paid to Sparebankeiendom AS	18	17
Administration fee received from Møre Boligkreditt AS	24	22

Statement of financial position
Claims on subsidiaries	1 121	1 069
Covered bonds	0	25
Liabilities to subsidiaries	307	122
Accumulated loan portfolio transferred to Møre Boligkreditt AS	16 911	15 546

Note 10

EC capital

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The 20 largest EC holders in Sparebanken Møre as at 31.12.2015	Number of ECs	Percentage share of EC capital
Sparebankstiftelsen Tingvoll	981 000	9.92
Verdipapirfond Pareto Aksje Norge	511 958	5.18
MP Pensjon	430 282	4.35
Wenaasgruppen AS	380 000	3.84
VPF Nordea Norge Verdi	327 073	3.31
Pareto AS	305 189	3.09
FLPS - Princ All Sec	227 634	2.30
Bergen Kommunale Pensjonskasse	210 000	2.12
VPF Fondsfinans Norge	154 000	1.56
Beka Holding AS	150 100	1.52
Farstad Shipping ASA	126 909	1.28
Sparebanken Møre	125 122	1.27
Lapas AS (Leif-Arne Langøy)	105 500	1.07
Verdipapirfondet Eika utbytte	103 385	1.05
Odd Slyngstad	80 528	0.81
Andvord AS	71 400	0.72
PIBCO AS	62 000	0.63
Stiftelsen Kjell Holm	61 069	0.62
Forsvarets Personellservice	59 660	0.60
Verdipapirfondet Landkreditt utbytte	54 000	0.55
Total 20 largest	4 526 809	45.79
Total	9 886 954	100.00

Note 11

Capital adequacy

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	31.12.2015	31.12.2014
EC capital	989	989
- ECs owned by the Bank	-13	-11
Share premium	354	353
Dividend equalisation fund	935	799
Gift fund	125	125
Primary capital fund	2 183	2 048
Value adjustment fund	82	34
Proposed dividend for the EC holders	114	133
Proposed dividend for the local community	115	136
Other equity	228	238
Total equity	5 112	4 844
Deferred tax, goodwill and intangible assets	-47	-20
Value adjustments of financial instruments at fair value	-12	-12
Value adjustment fund	-82	-34
50 % deduction for equity in other financial institutions	0	0
Perpetual Hybrid Tier 1 capital	808	860
Deduction for overfunded pension liability	0	0
Expected losses exceeding actual losses, IRB portfolios corporate	-173	-193
Proposed dividend for the EC holders	-114	-133
Proposed dividend for the local community	-115	-136
Total core capital	5 377	5 176
Common equity Tier 1 Capital	4 569	4 316

Supplementary capital
Subordinated loan capital of limited duration	501	501
36 % addition for net unrealised gains on shares available for sale	0	12
50 % deduction for equity in other financial institutions	0	0
Total supplementary capital	501	513
Net equity and subordinated loan capital	5 878	5 689

Capital requirement by exposure classes

Exposure classes SA - credit risk
Central governments or central banks	0	0
Regional governments or local authorities	6	4
Public sector companies	20	21
Institutions (banks etc)	52	51
Companies (corporate customers)	5	33
Mass marked (retail banking customers)	0	26
Secured by mortgage on immovable property	0	976
Exposures in default	0	3
Covered bonds	16	13
Equity	8	6
Other items	91	81
Total capital requirements - credit risk, The Standardised Approach	198	1 214

Exposure classes IRB - credit risk
Retail - Secured by real estate	563	-
Retail - Other	46	-
SME	773	854
Specialised lending	512	440
Other corporate lending	252	174
IRB-F capital requirements	2 146	1 468
Total capital requirements - credit risk	2 344	2 682

Exposure classes SA - market risk
Debt	0	0
Equity	0	0
Foreign exchange	0	0
Credit value adjustment risk (CVA)	40	21
Total capital requirements - market risk	40	21
Operational Risk (Basic Indicator Approach)	190	180
Deductions from the capital requirement	0	0
Total capital requirement less transitional rules	2 574	2 883
Additional capital requirements from transitional rules 1)	0	0
Total capital requirements	2 574	2 883

Risk-weighted assets (calculation basis for capital adequacy ratio)
Risk-weighted assets less transitional rules	32 170	36 036
Additional RWA from transitional rules 1)	0	0
Total risk-weighted assets	32 170	36 036
Minimum requirement common equity Tier 1 capital (4.5 %)	1 448	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 %)	804	900
Systemic risk buffer (3.0 %)	965	1 081
Total buffer requirements	1 769	1 981
Available common equity Tier 1 capital after buffer requirements	1 352	713

Capital adequacy as a percentage of the weighted asset calculation basis incl. transitional rules
Capital adequacy ratio	18.3	15.8
Core capital ratio	16.7	14.4
Core Tier 1 capital ratio	14.2	12.0

Sparebanken Møre's capital requirements at 31st December 2015 are based on IRB-Foundation for corporate commitments and IRB-Retail for retail commitments.

Leverage Ratio (LR)
Leverage Ratio (LR)	8.2	7.9