Notes to accounts

Note 1 General Information

SpareBank 1 Boligkreditt AS (the Company) is the SpareBank 1 Alliance's separate legal vehicle established according to the specialist banking principle within the Norwegian legislation for covered bonds.

The Company's purpose is to acquire residential mortgages from its ownership banks organised in the SpareBank 1 Alliance and finance these by issuing covered bonds.

SpareBank1 Boligkreditt main office is located in Stavanger, visiting address Bjergsted Terrasse 1.

The accounts are prepared in accordance with "International Financial Reporting Standards" (IFRS), as determined by the EU and published by "International Accounting Standards Board" (IASB).

The Financial Statements for 2019 is approved by the Board of Directors on February 4, 2020.

Note 2 Summary of Significant Accounting Policies


Presentation Currency 
The presentation currency is Norwegian Kroner (NOK), which is also the Company's functional currency. All amounts are given in NOK thousand unless otherwise stated.

Recognition and De-recognition of Assets and Liabilities on the Balance Sheet
Assets and liabilities are recognised on the balance sheet at the point in time when the Company establishes real control over the rights of ownership to assets and becomes effectively responsible for the discharge of liabilities .

Assets are de-recognised at the point in time when the real risk of the assets has been transferred and control over the rights to the assets has been terminated or expired. Liabilities are de-recognised when they have been effectively discharged.

Loans are measured at amortised cost. Amortised cost is the acquisition cost minus the principal payments, plus the cumulative amortisation using the effective interest rate method, adjusted for any loss allowance less write-off. Each of the Company’s mortgage loans is made at a variable rate, which may be changed by the Company at any time, with a regulatory mandated notification time of six weeks before such changes can become effective. Expected credit loss (ECL) is calculated according to IFRS 9, which was implemented January 1, 2018 (see below for a description of the application of IFRS 9).

Expected credit loss on mortgage loans; evaluation of impairments (write downs)
IFRS 9 was implemented effective January 1, 2018 . The initial calculation for ECL was 11.8 million for the balance of mortgage loans at January 1, 2018. This ECL has remained largely stable . For loans for which there has not been a significant increase in credit risk since initial recognition (loans in stage 1) ECL is measures as 12-mounth expected credit losses. For loans for which there has been a significant increase in credit risk since initial recognition (loans in stage 2 or 3) ECL is measured at lifetime expected credit losses. Loans in stage 3 are loans that are credit-impaired. The limits which determine when a mortgage loan is moved from Stage 1 to Stage 2 are:

  • Payment delayed by 30 days or more
  • Probability of default has increased by 150% (or two classes in the internal model estimating PD)
  • A minimum PD of above 0.6%

The Company has no mortgage loans in Stage 3, which contains loans in default (90 days or more of missed payments).

Model for loan loss provisioning
To consider the uncertainty of the future the model applied in estimating ECL three scenarios  .  . are developed .A base  scenario, an upside scenario and a downside scenario and these are intended to reflect three different states the economic cycle can take . The scenarios are weighted, with the most weight assigned to the base scenario . The base scenario input variables are mostly derived from forecasts from Statistics Norway, while the downside scenario input variables are sourced from, but may not exactly replicate, the Financial Services Authority of Norway’s stress case scenario included in its annual risk outlook reports.

When deriving the base estimates for PD and LGD the Company use the same model as for the Company’s Internal Capital Adequacy Assessment Process (ICAAP) . The model estimates the default rate (PD) and the loss given based on two macro variables; the unemployment rate and the level of NIBOR . The documentation behind the Company’s ICAAP model finds and discusses, and the models employs, the positive correlation between these variables and defaults for mortgage loans over the longer term, including also experience from neighbouring Nordic countries . The LGD is derived from calculations based on the degree of collateral coverage of the loans, i.e. the loan-to-value, also taking in a broader dataset to build the link between price developments and estimated losses .

Historically there has not been any mortgages in default in the Company’s portfolio . LGDs are set to reflect the fact that for a cover bond issuer the law stipulates a maximum loan to value criteria of 75 per cent. The low loan to value ratio  results in low expected loan losses if loans where to default . ECLs are updated quarterly based on a rescoring of the entire mortgage portfolio . Changes in the ECL is a charge or an income in the income statement for that period and is reflected on the balance sheet against the portfolio of mortgage loans.

According to the Transfer and Servicing Agreement which the SpareBank 1 banks each have entered into with the Company, SpareBank 1 Boligkreditt has the right to off-set any losses incurred on individual mortgage loans against the commissions due to all banks for the remainder of the calendar year . The Company has not since the commencement of its operations had any instances of off-sets against the commissions due to its owner banks. Mortgage loans which are renegotiated, where the terms are materially changed, are always removed from the Company’s cover pool and transferred back the originating lender . All renegotiation of loans is outsourced to the banks from which the loans have been purchased.

Segments are organised by business activities and the Company has only one segment, mortgage lending to private individuals . All of the mortgages have been acquired from the SpareBank 1 Alliance banks . The Company's results therefore largely represent the result of the mortgage lending to private customers segment, in addition to the income effects from the liquidity portfolio . Nearly all of the net interest income margin (customer interest income less funding costs) for the mortgages are paid out to the SpareBank 1 Alliance banks . The net result of the Company is therefore small in comparison to the overall portfolio of mortgage loans.

Securities consists of certificates and bonds. These are carried at fair value . Securities will either be part of a liquidity portfolio with a narrow mandate (highly rated, highly liquid securities and cash, including repos) or a collateral portfolio, which reflect the funds received from counterparties in swaps . All securities classified and recorded at fair value will have changes in value from the opening balance recorded in the income statement as net gains/losses from financial instruments .    

Hedge Accounting
The company has implemented fair value hedge accounting for fixed rate bonds in NOK and  in foreign currencies. These bonds are designated as hedged items in  hedging relationships with individually tailored interest rate swaps and cross currency interest rate swaps. The company values and documents the hedge effectiveness of the hedge both at first entry and consecutively. The cash flow is therefore known for the entire contractual duration after the hedging relationship has been established. During the hedge relationship the measurement of the hedged item is adjusted for the change in fair value of the hedged risk which at the same time is recognised in profit or loss. The derivative hedging instruments is measured at fair value with changes in fair value recognised in profit or loss except for the change in fair value of the currency basis spread which is recognised in other comprehensive income. The initial measure of the basis spread is  recognised in profit or loss over the life of the hedging relationship..    

 All hedges are deployed to exactly offset a cash flow for the duration of the hedged instrument, thus bringing financial liabilities (bonds outstanding) in fixed rate and/or foreign currency into a NOK 3 month NIBOR basis, while financial assets at fixed rates and/or foreign currency are transformed to a floating rate 3 month NIBOR asset through the derivative . Derivatives used are swap contracts only.

Valuation of Derivatives and Other Financial Instruments
The Company uses financial derivatives to manage essentially all market risk on balance-sheet items . Interest rate risk is hedged to a NIBOR 3 months floating rate basis and currency risk is hedged mostly by derivatives and in some cases by natural asset liabilities hedges .


  • The Company applies fair value hedge accounting for fixed rate issued debt (covered bonds) utilizing derivatives (swaps) which hedge the fixed interest rate and currency elements of the issued bonds.
  • There is also an element of amortized costs in issued fixed rate debt; where the issue price is different to par or 100 per cent, this difference is amortized over the life of the bond which is repayable at 100 per cent of par
  • The interest rate curve used to discount cash flows in NOK is determined by NIBOR for various maturities less than 12 months and the swap rate curve in NOK for longer maturities .
  • The interest rate curve used to discount cash flows in EUR is determined by EURIBOR for various maturities less than 12 months and the swap rate curve in EUR for longer maturities.
  • Issued floating rate debt in NOK (which do not have any associated hedging swaps) are accounted for at amortized cost.


  • For liquidity management purposes the issuer maintains a portfolio of liquid assets (including bonds) which is valued at fair value at observable market prices
  • Funds received for the purpose of collateralization of swap exposures which counterparties have to the Company may also be invested in bonds of a high rating, high liquidity and short maturities, in addition to cash and reverse repos . Such bond investments are held at fair value according to observable market prices
  • Swaps which hedge liquidity assets denominated in foreign currencies or hedge interest rates from fixed to floating are valued at fair value according to changes in foreign currency rates and interest rates.

Though the Company hedges all material interest rate and currency risk on its balance sheet, net unrealized gains (losses) from financial instruments may occur for the following reasons:

  • Temporary mark-to-market differences in the value of an interest rate swap may occur depending on the difference between the level at which the 3 months floating rate leg in the swap was last fixed and the 3 months interest rate level at the financial reporting date .
  • There is a credit risk element which forms a part of the fair value of the assets in the trading portfolio, which is not reflected in the value of the associated interest and/or currency swaps hedging the trading portfolio assets .
  • There may be floating rate assets (bonds) denominated in foreign currency which are hedged via a corresponding foreign exchange liability (issued debt) also on an effective floating rate basis. In such natural asset liability hedges there may be a small element of foreign currency risk which may impact the P&L in that the floating rate coupons on the asset and the liability are not reset on the same dates and/or may be of different magnitude. Also, a change in a market credit spread element would impact the price of some of the foreign currency assets held (bonds), though not the liability


Temporary differences will result from changes in foreign currency basis spread in cross currency interest rate swaps . Boligkreditt uses cross currency interest rate swaps in order to swap cash flows from floating interest rate foreign currency liabilities and assets into floating interest rate in NOK. The valuation of the change in the cost element to enter into these swaps with counterparties change from time to time . The valuation change will only occur on the derivatives and not on the foreign currency liabilities and thus cannot be mitigated . The impact in net income from this valuation element may be large and volatile . All gains and losses from changes in foreign currency basis spread reverse over as the derivatives remaining maturity decreases.

Intangible Assets
Purchased IT-systems and software are carried on the balance sheet at acquisition cost (including expenses incurred by making the systems operational) and will be amortised on a linear basis over the expected life of the asset. Expenses related to development or maintenance are expensed as incurred.

Cash and Cash Equivalents
Cash and cash equivalents includes cash and deposits, other short term available funds and investments with a maturity of less than three months.

Tax in the income statement consists of tax payable on the annual taxable result before tax and deferred tax . Deferred tax is calculated in accordance with the liability method complying with IAS 12 . With deferred taxes the liability or asset is calculated based on temporary differences, which is the difference between tax due according to the statutory tax calculations and tax calculated according to the financial accounts, as long as it is probable that there will be a future taxable income and that any temporary differences may be deducted from this income.

The statutory tax rate for financial services companies is 25 per cent.
In terms of deferred taxes, assets will only be included if there is an expectation that a future taxable result makes it possible to utilise the tax relief . The assessment of this probability will be based on historic earnings and the future expectations regarding margins.

SpareBank 1 Boligkreditt AS has a defined contribution pension plan for all employees. . In addition to the defined contribution plan, the Company has other uncovered pension obligations accounted for directly in the profit and loss statement. These obligations exist for early pensions according to AFP (“Avtalefestet pensjon”) and other family pension benefits in conjunction with a previous Chief Executive Officer. For the current Chief Executive Officer of SpareBank 1 Boligkreditt future pension obligations for remuneration above the limit of 12 times the basic allowance or limit (12G) as formulated by the national pension scheme are also accounted for in the Company's accounts.

Defined Contribution Plan

In a defined contribution plan the company pays a defined contribution into the pension scheme. The Company has no further obligations beyond the defined contributions. The contributions are recorded as salary expense in the accounts. Any prepaid contributions are recorded as assets in the balance sheet (pension assets) to the extent that the asset will reduce future payments when due.

The Company has seven employees as of year-end 2018 . All employees are included in SpareBank 1 SR-Bank ASAs pension scheme and accrue the same benefits as the other membership in that scheme which are employees of SpareBank 1 SR-Bank ASA .

Cash Flow Statement

The cash flow statement has been presented according to the direct method, the cash flows are grouped by sources and uses . The cash flow statement is divided into cash flow from operational, investment and finance activities .

The Company will create provisions when there is a legal or self-administered liability following previous events, it is likely that this liability will be of a financial character, and it can be estimated sufficiently accurately. Provisions will be assessed on every accounting day and subsequently adjusted to reflect the most accurate estimate. Provisions are measured at the present value of the expected future payments required to meet the obligation. An estimated interest rate which reflects the risk free rate of interest in addition to a specific risk element associated with this obligation will be used as the pre-tax rate of discount.

Supplier Debt and other Short Term Liabilities 
Supplier debt is initially booked at fair value. Any subsequent calculations will be at amortised cost, determined by using the effective rate of interest method. Supplier debt and other short term liabilities where the effect of amortising is negligible, will be recorded at cost.

Interest Income and Expense
Interest income and expense associated with assets and liabilities are recorded according to the effective rate of interest method. Any fees in connection with interest bearing deposits and loans will enter into the calculation of an effective rate of interest, and as such will be amortised over the expected maturity.

Commission Expense
Commissions are paid by the Company to its parents banks and represent most of the net interest margin earned in Boligkreditt.

Proposed dividends are recorded as equity during the period up until they have been approved for distribution by the Company's general assembly.

Events after the Balance Sheet Date
The annual accounts are deemed to be approved for publication when the Board of Directors have discussed and approved them. The General Meeting and any regulatory authorities may subsequently refuse to approve the annual accounts, but they cannot change them. Events up until the annual accounts are deemed to be approved for publication and that concern issues already known on the accounting day, will be part of the information that the determination of accounting estimates have been based on, and as such will be fully reflected in the accounts. Events that concern issues not known on the accounting day, will be commented upon, provided that they are of relevance.

The annual accounts have been presented under the assumption of continuing operations. This assumption was, in the opinion of the Board of Directors, justified at the time when the accounts were presented to the Board of Directors for approval.     

Share Capital and Premium
Ordinary shares are classified as equity capital. Expenses directly related to the issuing of new shares or options with tax relief, will be recorded in the accounts as a reduction in the proceeds received.

Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value (e.g. net realizable value for the purpose of measuring inventories or value in use for impairment assessment purposes).

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS 13 includes extensive disclosure requirements.

Adoption of New and Revised International Financial Reporting Standards (IFRSs)
IFRS 16 for lease accounting has been assessed. The Company has no leases with lease-term in excess of 12 months.

IASB approved changes to IFRS 9 and IFRS 7 in September 2019. These changes are obligatory from 2020, but may be adopted early for 2019. The Company has chosen to implement the changes early. It follows from this choice that hedging relationships may be continued unaffected by the IBOR reforms . The IBOR reforms is an ongoing process whereby reference interest rates included in receivables, loans and derivatives are exchanged for new reference rates . Further information about this is provided in note 19.

Note 3 Risk Management

SpareBank 1 Boligkreditt AS is an institution which acquires residential mortgages from banks in the SpareBank 1 Alliance.

This activity is predominantly financed by the issuance of covered bonds . The Company is therefore subject to the Norwegian legislation for covered bonds and the demands this imply for exposure to risk. In addition, the Company wishes to maintain the Aaa rating from Moody's, with regards to the covered bonds, which also requires a high degree of attention to risk management and a low risk exposure profile.

The purpose with the risk and capital adequacy management within SpareBank 1 Boligkreditt AS is to ensure a satisfactory level of capital and a responsible management of assets in accordance with the Company's statutes and risk profile. This is ensured through an adequate process for risk management and planning and implementation of the Company's equity capital funding and capital adequacy .

The Company's risk- and capital management are aiming to be in accordance to best practices - and this is ensured through:

  • A risk culture characterised through high awareness about types of risk and the management thereof
  • A competent risk analysis and control environment
  • A good understanding of which material risks the Company is exposed to

Organisation and organisational culture
SpareBank 1 Boligkreditt AS is focused on maintaining a strong and alert organisational culture characterised by high awareness about risk management.

SpareBank 1 Boligkreditt AS is focused on independence and control, and the responsibilities are divided between different roles within the organisation:

  • The Board of Directors determines the main principles for risk management, including determining the risk profile, limits and guidelines. The Board also carries the responsibility to review capital levels in accordance with the risk profile and the requirements of the regulatory authorities.
  • The Chief Executive Officer is responsible for the day to day administration of the Company's business and operations according to laws, statutes, powers of attorney and instructions from the Board . Strategic items or operational items of an unusual nature or importance are discussed with and presented to the Board of Directors. The CEO may however decide a matter in accordance with a power of attorney from the Board. The CEO is responsible for implementing the Company's strategy and in cooperation with the Board to also develop and evolve the strategy .
  • The risk manager reports both to both the CEO and to the Board, but is employed directly by the board and not the CEO . The risk manager is tasked with developing the framework for risk management including risk models and risk management systems . The position is further responsible for the independent evaluation and reporting of risk exposure in addition to maintain all relevant laws and regulations.
  • The balance sheet committee is headed by the CEO and consists of the CFOs of the largest banks in the SpareBank 1 Alliance in addition to one representative from the smaller Alliance banks (Samspar). The balance sheet committee is an advisory group for the operational management of the Company's balance sheet within the framework determined by the Board of Directors . The committee is an important component of Boligkreditt's operative management of liquidity risks . The investment committee is an advisory council for the evaluation of counterparty exposure limits and for the composition of the liquidity portfolio . The committee is headed by the CEO and consists of Boligkreditt's financial director and director for asset liability management . The committee advises on credit limits for counterparties and the composition of the liquidity portfolio . The CEO has been tasked by the Board to make decisions regarding credit limits for counterparties and individual investments.

Risk Categories:

In its risk management the Company's differentiates amongst the following categories of risk:

  • Credit Risk: The risk of loss as a result of that counterparties are unwilling and/or unable to meet their obligations to the Company . Credit risk management is detailed in the Company's credit risk policy and this policy is approved by the Board of Directors annually .
  • Liquidity Risk: The risk that the Company is unable to meet its obligations and/or finance its assets
  • Market Risks: The risk of loss as a result of changes in observable market variables such as interest rates, foreign exchange rates and securities.

Further details about risk categories are discussed in later Notes

Note 4 Important Estimates and Considerations Regarding Application of Accounting Policies

The presentation of financial information in accordance with IFRS results in that management uses estimates and makes assumptions which affect the outcome of certain accounting principles, including the amounts accounted for assets, liabilities, income and cost.

Loss on loans and guarantees
Estimates are made regarding the future path of probability of default rates and loss given default rates under different economic scenarios . Starting with actually observed PD rates for residential mortgages that have or can be transferred to the Company as a proxy for the actual expected PD rates, these scenarios are developed within a base, downside and upside case for the economic development (interest rates and unemployment being important and driving factors) . Each quarter the entire portfolio of mortgage loans are run through the Company’s IFRS 9 loan loss model and the cumulative expected loss is a function of the current portfolio’s risk classification, migration of the mortgage loans on the Company’s risk scale since granting the loans and these scenarios for the future . See also the description above under Note 2 “Risk of loss on mortgage loans; evaluation of impairments (write downs)

Fair value of financial instruments
The fair value of financial instruments which are not traded in a liquid market are determined using valuation techniques . The Company utilises methods and assumptions which are as far as possible based on observable market data and which represent market conditions as of the date of the financial accounts . When valuing financial instruments where no observable market data are available, the Company estimates values based on what it is reasonable to expect that market participants would use as a basis for valuation of financial instruments.

The Company’s regular pension scheme is a defined contribution plan under which once the contribution is made for the period, which is recorded in compensation expense for that period, no further liability arises. However, there are certain other pension elements for which the Company records a pension liability (see above under Note 2 “Pensions”) . Net pension obligations are based on a number of estimates including future investment returns, future interest rate and inflation levels, developments in compensation, turnover, development in the "G" amount (the basic level of pension as determined by the public pension system and used as a yardstick in several calculations nationally) and the general development in the number of disabled persons and life expectancy are of significant importance . The uncertainty is primarily related to the gross obligation for pensions and not the net amount which is recorded in the financial accounts (balance sheet) . Changes in pension obligation estimates which may result from changes in the factors mentioned above will be charged directly against the Company's recorded equity .

Income Taxation
The calculation of the income tax also incorporates material estimates . For some transactions and calculations there will be a degree of uncertainty related to the final tax obligation. SpareBank 1 Boligkreditt AS records tax obligations based upon whether future income tax obligations are expected to materialise . If the final outcome of a particular case deviate from the original accrued amount for tax, the difference will affect the profit and loss account for tax expense. The recognised amounts for deferred taxation in the period where the difference is established will also be affected . Differences between tax estimates and actual taxation is typically not a material number for the Company.

Note 5 Net Interest Income

NOK 1 000 2019 2018
Interest income    
Interest income from. certificates. bonds and deposits 280,846 380,228
Interest income from residential mortgage loans 5,553,510 4,715,801
Total interest income 5,834,356 5,096,029
Interest expense    
Interest expense and similar expenses to credit institutions -45,148 -25,036
Interest expense and similar expenses on issued bonds 3,903,694 3,211,071
Interest expense and similar expenses on subordinated debt 48,356 50,836
Bank resolution Fund * 42,911 -
Other interest expenses 8,494 7,757
Total interest expense 3,958,307 3,244,627
Net interest income 1,876,048 1,851,402

* From 2019, SPB1 Boligkreditt has been included in the cost sharing for the Norwegian bank resolution fund

Note 6 Net Gains from Financial Instruments

NOK 1 000 2019 2018
Net gains (losses) from financial liabilities (1) -6,958,008 -4,904,674
Net gains (losses) from financial derivatives. hedging liabilities. at fair value. hedging instrument (1.3) 6,990,649 4,849,334
Net gains (losses) from financial assets (2) -272,077 -234,796
Net gains (losses) from financial derivatives. hedging assets. at fair value. hedging instrument (2.3) 68,140 -3,394
Net gains (losses) -171,295 -293,531

(1) The Company utilizes hedge accounting as defined in IFRS for issued fixed rate bonds (covered bonds) with derivatives (swaps) which hedges fixed rates to floating and foreign currencies to Norwegian kroner. The hedges are individually tailored to each issued bond and exactly matches the cash flows and duration of the issued bonds. Some liabilities in foreign currency are hedged with natural hedges (corresponding assets in the same currency) and will cause the valuation change of the liabilities to be different to the valuation changes in the derivatives hedging the liabilities. There will also be valuation difference between hedged instruments and hedging instruments due to the the amortization of issuance costs of debt and when the hedged instruments (bonds) are issued at prices different from par value.

(2) SpareBank 1 Boligkreditt AS manages its liquidity risk by refinancing its outstanding bonds ahead of expected maturities and keeping proceeds as a liquidity portfolio. The majority of this portfolio is valued according to observed market values (fair value). Fixed rate bonds and bonds in other currencies than Norwegian kroner are hedged using swaps. These are valued at fair value (though differences may occur because the valuation of the bonds include a credit risk/spread element which the swaps do not contain). Included in assets in the table are also investments which are hedged with natural currency hedges, as well as investments in short term, highly rated bonds from funds received from swap counterparties for collateral purposes, with a matching fx liability to the swapcounterparty as a liability.

(3) All derivatives are valued at fair value according to changes in market interest rates and foreign exchange rates. Changes in valuations from the previous period is accounted for in profit and loss.

Note 7 Salaries and Remuneration

NOK 1 000 2019 2018
Salary 9,682 10,201
Salaries reinvoiced to SpareBank1 Næringskreditt* -2,772 -2,870
Pension expenses 1,727 2,055
Social insurance fees 2,536 2,146
Other personnel expenses 606 234
Total salary expenses 11,780 11,766
Average number of full time equivalents (FTEs) 7 7

* The company’s employees have shared employment between SpareBank 1 Næringskreditt and SpareBank 1 Boligkreditt. All remuneration is effectuated through SpareBank 1 Boligkreditt and a portion is reinvoiced to SpareBank 1 Næringskreditt. Pension benefit obligations are through membership of a defined contribution scheme, which the Company pays into on behalf of the employees. Se also note 9 for further details on pensions

Note 8 Salaries and other remuneration of management

Paid in 2019

NOK 1 000 Wage compensation Bonus Other compensation Pension cost Accrued Pensions Employee mortgage loan
Chief Executive Office - Arve Austestad 2,309 - 181 628 6,189 2,519
Chief Operating Officer - Henning Nilsen 1,593 - 92 162 863 7,276
Chief Financial Officer - Eivind Hegelstad 1,575 - 62 165 - 4,025
Total for Management 5,477 - 335 955 7,052 13,820

Paid in 2018

NOK 1 000 Wage compensation Bonus Other compensation Pension cost Accrued Pensions Employee mortgage loan
Chief Executive Office - Arve Austestad 2,205 - 183 658 5,345 3,124
Chief Operating Officer - Henning Nilsen 1,503 - 87 155 852 7,233
Chief Financial Officer - Eivind Hegelstad 1,513 - 64 158 - 4,093
Total for Management 5,221 - 334 971 6,197 14,450

All employees have an offer of an employee mortgage loan from SpareBank 1 SR-Bank. The terms and conditions for this include an interest rate one percentage point below the standard rate as determined by the Norwegian Treasury Department from time to time. Numbers above reflect total compensation, which is split between Boligkreditt and Næringskreditt according to a certain ratio (see note 7 for more detail)

          Paid in 2019 Paid in 2018
The Board of Directors            
Kjell Fordal         111 108
Rolf Eigil Bygdnes         89  
Merete N. Kristiansen         89 87
Inger Marie Stordal Eriksen         89 87
Geir-Egil Bolstad         89 87
Knut Oscar Fleten         89 -
Trond Sørås         24 23
Inge Reinertsen         - 87
Total for the Board of Directors         580 479

Payments for the Board of Directors take place in the year following their year of service. The amount paid and the composition of the Board reflects that of the period prior to the periods listed under the column headings “Paid in”

Note 9 Pensions

SpareBank 1 Boligkreditt employees (eight in total) are all at a defined contribution pension scheme. The Company pays the agreed contribution into the pension scheme and has no further obligations. For the Company's CEO the Company has future pension obligations for salary above 12G (the cap for contributions according to the defined contribution scheme) and these liabilities are accounted for in the Company's accounts.

  2019 2018
Net pension obligations on the balance sheet    
Present value pension obligation as of Dec 31 13,941 12,955
Pension assets as of Dec 31 4,384 4,172
Net pension obligation as of Dec 31 9,558 8,783
Employer payroll tax 1,826 1,678
Net pension obligation recorded as of Dec 31 11,383 10,461
  2019 2018
Pension expense in the period    
Defined benefit pension accrued in the period 793 965
Defined contribution plan pension costs including AFP 969 1,133
Pension expense accounted for in the income statement 2,097 2,097

The following economic assumptions have been made when calculating the value of the pension obligations which are not related to the defined contribution plan:

  2019 2018
Discount rate 2.30 % 2.60 %
Expected return on pension assets 2.30 % 2.60 %
Future annual compensation increases 2.25 % 2.75 %
Regulatory cap change 2.00 % 2.50 %
Pensions regulation amount 0.50 % 1.60%/2.00%
Employer payroll taxes 14.10 % 14.10 %
Finance tax 5.00 % 5.00 %

Note 10 Other Operating Expenses

NOK 1 000 2019 2018
IT and IT operations 11,775 9,565
Purchased services other than IT 10,159 8,310
Other Operating Expenses 2,097 1,987
Depreciation on fixed assets and other intangible assets 328 628
Total 24,359 20,490


Remuneration to PWC (from2019)/Deloitte AS and cooperating companies is allocated as follows:

NOK 1 000 2019 2018
Legally required audit 231 578
Other attestation services. incl. examination services. loan documents sample testing. comfort letters - 730
Other services outside auditing 125 153
Total (incl VAT) 356 1,461

Note 11 Taxes

NOK 1 000 2019 2018
Pre-tax profit 225,179 6,503
Permanent differences -60,097 -54,646
Change in temporary differences 910,739 627,381
Temporary differences from basis swap spread adjustment. shown in other comprehensive income -74,707 -280,245
Temporary differences from pension estimate deviation. shown in other comprehensive income -353 5,468
Temporary differences from implementing IFRS 9 ECL model. recorded directly in equity - -4,095
Change in temporary differences due to use of previously tax deficit - -238,353
Tax base/taxable income for year 1,000,762 62,013
Tax payable for the year 250,190 15,503
Tax effect of change in temporary differences recorded in OCI / Equity 18,765 69,718
Tax effect of interest on hybrid capital. recorded directly in equity 15,028 13,663
Change in deferred tax -227,685 -97,257
Tax expense for the year 56,298 1,627
The charge for the year can be reconciled to the profit before tax as follows:    
Profit before tax on continuing operations 225,179 6,503
Expected tax expense - tax rate 25 % 56,295 1,626
Deferred tax    
Financial instruments -185,462 43,016
Pension liability -2,846 -2,615
Tax losses to be carried forward - -
Effect of implementing IFRS 9 ECL model - -1,024
Net deferred tax benefit (-) / deferred tax (+) -188,308 39,377
Taxrate applied 25 % 25 %
Taxrate applied for temporary differences 25 % 25 %

Note 12 Other Assets

NOK 1 000   2019 2018
Intangible assets *   379 707
Account receivables from SpareBank 1 Næringskreditt AS   499 1,043
Other   12 -
Total   890 1,750

* Intangible assets

NOK 1 000  
Acquisition cost 01.01.2018 34,305
Acquisitions 897
Acquisition cost 31.12.2018 35,202
Accumulated depreciation and write-downs 01.01.2018 33,867
Periodical depreciation 628
Periodical write-down -
Disposal ordinary depreciation -
Accumulated depreciation and write-downs 31.12.2018 34,495
Book value as of 31.12.2018 707
Acquisition cost 01.01.2019 35,202
Acquisitions -
Disposals -
Acquisition cost 31.12.2019 35,202
Accumulated depreciation and write-downs 01.01.2019 34,495
Periodical depreciation 328
Periodical write-down -
Disposal ordinary depreciation -
Accumulated depreciation and write-downs 31.12.2019 34,823
Book value as of 31.12.2019 379
Financial lifespan 3 years
Depreciation schedule linear

Note 13 Residential mortage loans

Lending to customers are residential mortgages only. The mortgages generally have a low loan-to-value and losses have been very low. The total amount of lending to customers at the end of 31.12.2019 were NOK 191,3 billion. All mortgages carry a variable interest rate.

NOK 1 000       2019 2018
Revolving loans - retail market       42,431,353 45,484,285
Amortising loans - retail market       148,660,350 138,418,290
Accrued interest       229,402 183,912
Total loans before specified and unspecified loss provisions       191,321,105 184,086,488
Stage 1       183,557,607 177,082,658
Stage2       7,763,498 7,003,830
Stage 3       - -
Gross loans       191,321,105 184,086,488
Impairments on groups of loans          
Expected credit loss. stage 1       1,068 3,905
Expected credit loss. stage 2. no objective proof of loss       10,695 8,665
Expected credit loss. stage 3. objective proof of loss       - -
Total net loans and claims with customers       191,309,342 184,073,918
Unused balances under customer revolving credit lines (flexible loans)       12,028,316 12,304,082
Total       12,028,316 12,304,082
Defaulted loans          
Defaults*       0.0 % 0.0 %
Specified loan loss provisions       0.0 % 0.0 %
Net defaulted loans       0.0 % 0.0 %
Loans at risk of loss          
Loans not defaulted but at risk of loss       0.0 % 0.0 %
- Write downs on loans at risk of loss       0.0 % 0.0 %
Net other loans at risk of loss       0.0 % 0.0 %

*The entire customer loan balance is considered to be in default and will be included in overviews of defaulted loans when overdue instalments and interest payments are not received within 90 days or if credit limits on revolving loans are exceeded for 90 days or more.

Loans sorted according to geography (Norwegian counties)

NOK 1 000   Lending 2019 Lending 2019 % Lending 2018 Lending 2018 %
NO01 Østfold -7,735,515 4.04 % -7,079,758 3.85 %
NO02 Akershus -23,767,409 12.42 % -22,273,568 12.10 %
NO03 Oslo -27,048,500 14.14 % -23,312,977 12.67 %
NO04 Hedmark -13,946,811 7.29 % -13,322,545 7.24 %
NO05 Oppland -7,105,737 3.71 % -6,503,295 3.53 %
NO06 Buskerud -13,151,869 6.87 % -12,457,779 6.77 %
NO07 Vestfold -8,548,809 4.47 % -8,003,910 4.35 %
NO08 Telemark -7,920,355 4.14 % -7,111,149 3.86 %
NO09 Aust Agder -240,001 0.13 % -275,254 0.15 %
NO10 Vest Agder -637,107 0.33 % -833,060 0.45 %
NO11 Rogaland -4,288,510 2.24 % -8,298,260 4.51 %
NO12 Hordaland -1,799,093 0.94 % -2,266,310 1.23 %
NO14 Sogn og Fjordane -378,758 0.20 % -383,303 0.21 %
NO15 Møre og Romsdal -11,536,407 6.03 % -10,918,164 5.93 %
NO18 Nordland -13,504,816 7.06 % -13,286,543 7.22 %
NO19 Troms -12,359,832 6.46 % -11,791,342 6.41 %
NO20 Finnmark -6,189,939 3.24 % -5,620,549 3.05 %
NO21 Svalbard -133,252 0.07 % -147,649 0.08 %
NO23 Trøndelag -31,016,621 16.21 % -30,188,501 16.40 %
SUM   -191,309,342 100.0 % -184,073,918 100.0 %

Note 14 Amounts arising from ECL

The following table show reconciliations from the opening to the closing balance of the loss allowance. Explanation of the terms 12-month ECL and lifetime ECL (stage 1-3) are included in note 1-4 the annual account 2019.

NOK 1 000 2019
Loans and advances to customers at amortized cost Stage 1 Stage 2 Stage 3 Total
Balance sheet on 31 December 2018 3,975 8,678 - 12,652
Transfer to 12 month ECL - - - -
Transfer to lifetime ECL - No objective evidence of loss - - - -
Transfer to lifetime ECL - objective proof of loss - -   -
Net remeasurement of loss allowance - - - -
New financial assets originated or purchased 450 3,559 - 4,009
Change due to reduced portifolio -1,400 -3,273 - -4,673
Other movements -1,940 1,749 - -191
Net change -2,891 2,035   -856
Balance sheet on 31 December 2019 1,084 10,713 - 11,797

Note 15 Share Capital and Shareholder Information

    List of shareholders as of 2019 List of shareholders as of 2018
    No of Shares in per cent Share of votes No of Shares in per cent Share of votes
SpareBank 1 Østlandet   16,961,710 22.29 % 22.29 % 15,539,102 21.61 % 21.61 %
SpareBank 1 SMN   15,898,802 20.89 % 20.89 % 14,879,609 20.69 % 20.69 %
SpareBank 1 Nord-Norge   14,190,446 18.65 % 18.65 % 12,810,567 17.82 % 17.82 %
BN Bank ASA   5,126,131 6.74 % 6.74 % 4,698,769 6.53 % 6.53 %
SpareBank 1 BV   4,776,009 6.28 % 6.28 % 4,624,963 6.43 % 6.43 %
Sparebanken Telemark   3,592,816 4.72 % 4.72 % 3,305,204 4.60 % 4.60 %
SpareBank 1 Ringerike Hadeland   3,486,683 4.58 % 4.58 % 3,231,669 4.49 % 4.49 %
SpareBank 1 Østfold Akershus   3,439,512 4.52 % 4.52 % 3,134,912 4.36 % 4.36 %
SpareBank 1 Nordvest   1,709,929 2.25 % 2.25 % 1,567,456 2.18 % 2.18 %
SpareBank 1 SR-Bank ASA   1,679,661 2.21 % 2.21 % 3,461,175 4.81 % 4.81 %
SpareBank 1 Modum   1,592,003 2.09 % 2.09 % 1,373,943 1.91 % 1.91 %
SpareBank 1 Søre Sunnmøre   1,023,992 1.35 % 1.35 % 892,095 1.24 % 1.24 %
SpareBank 1 Gudbrandsdal   1,012,200 1.33 % 1.33 % 880,485 1.22 % 1.22 %
SpareBank 1 Hallingdal Valdres   982,718 1.29 % 1.29 % 928,863 1.29 % 1.29 %
SpareBank 1 Lom og Skjåk   632,870 0.83 % 0.83 % 576,670 0.80 % 0.80 %
Total   76,105,482 100 % 100 % 71,905,482 100 % 100 %

The share capital consists of 76 105 482 shares with a nominal value of NOK 100

Hybrid capital

NOK 1000 ISIN Interest rate Issued year Call option   2019 2018
Hybrid (Tier 1 capital instrument) NO0010713746 3M Nibor + 310 bp 2014 09.05.2019   - 350,000
Hybrid (Tier 1 capital instrument) NO0010745920 3M Nibor + 360 bp 2015 23.09.2020   300,000 300,000
Hybrid (Tier 1 capital instrument) NO0010746191 3M Nibor + 360 bp 2015 29.09.2020   180,000 180,000
Hybrid (Tier 1 capital instrument) NO0010767643 3M Nibor + 360 bp 2016 22.06.2021   250,000 250,000
Hybrid (Tier 1 capital instrument) NO0010811318 3M Nibor + 310 bp 2017 01.12.2022   100,000 100,000
Hybrid (Tier 1 capital instrument) NO0010850621 3M Nibor + 340 bp 2019 30.04.2024   350,000 -
Book value           1,180,000 1,180,000

The issued bonds listed in the table abowe have status as Tier 1 capital instruments in the Company's capital coverage ratio.

Note 16 Liabilities incurred by issuing Securities

NOK 1 000     Nominal value* 2019 Nominal value* 2018
Senior unsecured bonds     - 1,047,000
Covered bonds     201,758,203 188,169,679
Total debt incurred by issuing securities     201,758,203 189,216,679

* Nominal value is incurred debt at exchange rates (EUR/NOK and USD/NOK) at the time of issuance

NOK 1 000     Book value 2019 Book value 2018
Senior unsecured bonds     - 1,046,990
Covered bonds     216,579,429 209,973,603
Activated costs incurred by issuing debt     -184,635 -165,808
Accrued interest     1,275,284 1,496,260
Total debt incurred by issuing securities     217,670,078 212,351,045

Liabilities categorized by debt instrument and year of maturity (nominal value*, net of repurchased bonds) NOK 1,000:

Senior Unsecured Bonds and notes

Due in 2019 2018
2018 - 1,047,000
Total - 1,047,000

Covered bonds

Due in 2019 2018
2019 - 24,954,124
2020 20,035,500 24,963,500
2021 28,881,382 28,894,098
2022 38,749,200 38,749,200
2023 30,356,650 30,378,725
2024 23,451,428 13,916,174
2025 10,648,750 10,648,750
2026 22,210,000 12,185,000
2027 673,042 674,808
2028 2,562,800 2,562,800
2029 23,946,950 -
2038 242,500 242,500
Total 201,758,203 188,169,679
Total 201,758,203 189,216,679

* Nominal value is incurred debt at exchange rates (EUR/NOK. USD/NOK. SEK/NOK and GBP/NOK) at the time of issuance

Debt incurred by currency (book values at the end of the period)

NOK 1 000     2019 2018
NOK     59,978,539 62,711,262
EUR     148,733,048 130,285,193
USD     - 10,707,438
GBP     8,706,679 8,382,733
SEK     251,812 264,420
Total     217,670,078 212,351,045

Note 17 Subordinated Debt

NOK 1000 ISIN Interest rate Issued year Call option from Maturity Nominal amount 2019 2018
With maturity                
Subordinated debt NO0010704109 3M Nibor + 225 bp 2014 07.03.2019 07.03.2024 475,000 - 475,000
Subordinated debt NO0010826696 3M Nibor + 153 bp 2018 22.06.2023 22.06.2028 250,000 250,000 250,000
Subordinated debt NO0010833908 3M Nibor + 180 bp 2018 08.10.2025 08.10.2030 400,000 400,000 400,000
Subordinated debt NO0010835408 3M Nibor + 167 bp 2018 02.11.2023 02.11.2028 475,000 475,000 475,000
Subordinated debt NO0010842222 3M Nibor + 192 bp 2019 24.01.2024 24.01.2029 300,000 300,000 -
Accrued interest             8.439 6.160
Book value             1,433,439 1,606,160

The issued bonds listed in the table aboww have status as Tier 2 capital instruments in the Company's capital coverage ratio.

Note 18 Reconciliation of liabilities arising from financing activities

The table below details changes in liabilities arising from financing activities. including both cash and non-cash changes.

      Non-cash changes  
NOK 1 000 2018 Financing cash flows Adjustments Other changes 2019
Debt incurred by issuing securities 213,393,154 12,608,151 -6,605,642 -305,210 219,090,452
Collateral received in relation to financial derivatives 18,733,053 -5,938,817 - -376,096 12,418,140
Subordinated debt 1,606,160 -175,000 - 2,280 1,433,439
  233,732,367 6,494,333 -6,605,642 -679,027 232,942,031

Note 19 Financial Derivatives

NOK 1 000 2019 2018
Interest rate derivative contracts    
Interest rate swaps    
Nominal amount 55,698,553 68,401,281
Asset 2,067,884 2,918,190
Liability -332,246 -514,399
Currency derivative contracts    
Currency swaps    
Nominal amount 145,222,180 140,302,215
Asset 14,186,570 20,265,604
Liability -542,709 -56,996
Total financial derivative contracts    
Nominal amount 200,920,732 208,703,496
Asset 16,254,454 23,183,793
Liability -874,955 -571,395
All derivative contracts exist for the purpose of hedging changes in interest rates and currency exchange rates.    
* Change due to basis swap spread adjustment 2019 2018
Asset/Liability -874,955 -571,395
Net gain (loss) on valuation adjustment of basisswap spreads -545,419 -470,713
Net asset (+) / liability (-) derivatives -1,420,374 -1,042,108

Basis swaps are currency swaps and are entered into at a certain cost (spread) between SpareBank 1 Boligkreditt and banks which offer such swaps and which have signed an ISDA agreement with the Company. Changes in the cost are valued each quarter across all of the Company's swaps in accordance with the IFRS rules. An increase in the cost would result in an increase in the value of the basisswaps while a cost decrease would reduce the value of the basis swaps. The effect may be material from quarter to quarter because the Company's portfolio of swaps is extensive. All basisswap value changes will reverse over time towards the point of termination of the swaps.

IBOR reforms
SpareBank 1 Boligkreditt utlizes derivates which include one or more referance rates which will be reformed, i.e. they are undergoing a process whereby there is to be less discretion by panel banks and industry bodies and more objectivity, based on market transactions, when setting these rates. In general these changes are implemented in markets from 2021.

The Company used the following hedging instruments and have other constellations involving IBOR rates:
1. Fixed rate NOK bonds issued and swapped to 3 months NIBOR exposure
2. Three month EURIBOR bonds issued swapped to a 3 month NIBOR exposure
3. Fixed rate EUR bonds issued and swapped to 3 months EURIBOR exposure
4. Fixed rate EUR bonds issued and swapped to 3 months NIBOR exposure
5. Three months LIBOR GBP bonds issued and swapped to 3 months NIBOR exposure
6. Fixed rate GBP bonds issued and swapped to 3 months NIBOR exposure
6. Fixed rate SEK bonds issued and swapped to 3 months NIBOR exposure

When it comes to the reform of Sterling LIBOR, the Company is evaluating a reference rate change from Sterling LIBOR to SONIA for its Sterling FRN, issued in 2017) and for which there are precedence in the market. For other reforms the Company will follow market practice, or sign ISDA protocols as the case may be, to use reformed IBOR rates.

Hedging instruments used. excluding NIBOR contracts. nominal values   2019
EURIBOR contracts under point 2 and 3 above   8,538,414
LIBOR contracts under point 4 above   5,778,450
Totale   14,316,864

Collateral received
Collateral received is a contractual feature in the Company’s ISDA contracts. For derivative (swap) contracts dated on or after March 1, 2017, all exposure that the Company has to counterparties is collateralized in cash from a threshold of zero. Contracts with a start date prior to 1 March 2017 may be subject to higher thresholds. The Company is entitled to offset all costs and other amounts it incurs with the collateral received, if the counterparty should not perform under the contract. The Company does not post out collateral it has not first received from counterparties.

NOK 1 000 2019 2018
Collateral received under derivatives contracts 12,418,140 18,733,053

Note 20 Classification of Financial Instruments

NOK 1 000 Financial instruments accounted for at fair value * Financial assets and debt accounted for at amortised cost 2019
Lending to and deposits with credit institutions - 9,801,250 9,801,250
Certificates and bonds 28,067,101 - 28,067,101
Residential mortgage loans - 191,309,342 191,309,342
Financial derivatives 16,254,454 - 16,254,454
Defered tax asset - - 188,308
Other assets - - 890
Total Assets 44,321,555 201,110,592 245,621,345
Debt incurred by issuing securities 176,719,863 40,950,215 217,670,078
Collateral received in relation to financial derivatives - 12,418,140 12,418,140
Repurchase agreement - - -
Financial derivatives 1,420,374 - 1,420,374
Deferred taxes - - -
Taxes payable - - 250,190
Subordinated dept - 1,433,439 1,433,439
Other liabilities - - 148,256
Total Liabilities 178,140,237 54,801,794 233,340,477
Total Equity - 1,180,000 12,280,868
Total Liabilities and Equity 178,140,237 55,981,794 245,621,345

*Fair value calculation according to changes in market interest rates and currencies exchange rates

NOK 1 000 Financial instruments accounted for at fair value * Financial assets and debt accounted for at amortised cost 2018
Lending to and deposits with credit institutions - 12,990,004 12,990,004
Residential mortage loans - 184,073,918 184,073,918
Certificates and bonds 25,271,910 - 25,271,910
Financial derivatives 23,183,793 - 23,183,793
Defered tax asset - - -
Other assets - - 1,750
Total Assets 48,455,704 197,063,922 245,521,375
Debt incurred by issuing securities 167,495,967 44,855,078 212,351,045
Collateral received in relation to financial derivatives - 18,733,053 18,733,053
Financial derivatives 1,042,108 - 1,042,108
Deferred taxes - - 39,377
Taxes payable - - 15,503
Subordinated dept - 1,606,160 1,606,160
Other liabilities - - 150,763
Total Liabilities 168,538,075 65,194,291 233,938,010
Total Equity - 1,180,000 11,583,366
Total Liabilities and Equity 168,538,075 66,374,291 245,521,375

*Fair value calculation according to changes in market interest rates and currencies exchange rates

Note 21 Financial Instruments at Fair Value


Methods in order to determine fair value

The interest rate curve that is used as input for fair value valuations of hedging instruments and hedging objects consists of the NIBOR-curve for maturities less than one year. The swap-curve is used for maturities exceeding one year.

Interest rate and currency swaps
Valuation of interest rate swaps at fair value is through discounting future cash flows to their present values. Valuation of currency swaps will also include the element of foreign exchange rates.

Valuation of bonds at fair value is through discounting future cash flows to present value.

IFRS 7 require a presentation of the fair value measurement of finacial instruments for different levels:

Level 1: Quoted price in an active market.  Fair value of financial instruments which are traded in active markets are based on the market price at the balance sheet date. A market is considered to be active if the market prices are easily and readily available from an exchange, dealer, broker, industry group, pricing service or regulating authority and that these prices represent actual and regular market transactions on an arm's length basis.

Level 2: Valuation based on observable factors.  Level 2 consist of instruments which are not valued based on listed prices, but where prices are indirectly observable for assets or liabilities, but also includes listed prices in not active markets.

Level 3: The valuation is based on factors that are not found in observable markets (non-observable assumptions). If valuations according to Level 1 or Level 2 are not available, valuations are based on not-observable information. The Company has a matter of principle neither assets nor liabilities which are valued at this level.

The following table presents the company’s assets and liabilities at fair value as of 31.12.2019

NOK 1 000 Level 1 Level 2 Level 3 Total
Certificates and bonds 19,623,810 8,443,291 - 28,067,101
Financial Derivatives - 16,254,454 - 16,254,454
Total Assets 19,623,810 24,697,745 - 44,321,555
Debt incurred by issuing securities - 176,719,863 - 176,719,863
Financial Derivatives - 1,420,374 - 1,420,374
Total Liabilities - 178,140,237 - 178,140,237

The following table presents the company’s assets and liabilities at fair value as of 31.12.2018

NOK 1 000 Level 1 Level 2 Level 3 Total
Certificates and bonds 22,844,167 2,427,743 - 25,271,910
Financial Derivatives - 23,183,793 - 23,183,793
Total Assets 22,844,167 25,611,536 - 48,455,703
Debt incurred by issuing securities - 167,495,967 - 167,495,967
Financial Derivatives - 1,042,108 - 1,042,108
Total Liabilities - 168,538,075 - 168,538,075

Note 22 Other Liabilities

NOK 1 000 2019 2018
Employees tax deductions and other deductions 548 623
Employers national insurance contribution 645 708
Accrued holiday allowance 994 946
Commission payable to shareholder banks 126,813 132,512
Deposits* 2,471 525
Pension liabilities 11,383 10,461
Expected credit loss unused credit lines (flexible loans) 34 83
Other accrued costs 5,368 4,905
Total 148,256 150,763

The Company does not have an overdraft facility or a revolving credit facility as of 31.12.2019
* Deposits represents temporary balances paid in by customers in excess of the original loan amount

Note 23 Credit Risk

Credit risk is defined as the risk that losses can occur as a consequence of that customers and others do not have the ability or willingness to meet their obligations to SpareBank 1 Boligkreditt as and when agreed.

Credit risk mainly includes loans to customers which are collateralised by private residences (residential mortgage loans), but also includes credit risk in hedging swaps (though any exposure must always be collateralized by the swap counterparty) and investment in bonds within the Company's liquidity portfolio.  SpareBank 1 Boligkreditt AS maintains a credit policy and limits in order to manage and closely monitor all credit risk the company is exposed to.

According to the Transfer and Servicing agreement between SpareBank 1 Boligkreditt and each parent bank, the Company has the right to reduce commissions payable for the remainder of the current calendar year to all of its parents banks by an amount equal to any incurred losses on individual mortgage loans.  The Company has not since the commencement of its operations had any instances of off-set against the commissions due to its parent banks.

Credit exposure

NOK 1 000         2019 2018
Loans to customers         191,309,342 184,073,918
Loans to and deposits with credit institutions         9,801,250 12,990,004
Certificates and bonds         28,067,101 25,271,910
Financial derivatives         16,254,454 23,183,793
Other assets         189,198 -
Total assets         245,621,345 245,521,375
Unused credit on flexible loans         12,033,187 12,303,478
Received collateral in relation to derivative contracts         -12,418,140 -18,733,053
Total credit exposure         245,236,393 239,091,800


Lending to customers (residential mortgage loans)
The risk classification of the Company's lending is conducted on the basis of an evaluation of the exposures. The evaluation is based on the following main criteria:

  • Ability of the customer to pay (income and debt)                           

  • Willingness to pay (payment remarks and other elements)                           

  • Size of the loan                           

  • Loan to value (maximum loan to collateral value is 75% and the collateral must be valued by an independent source,  Valuations are updated quarterly for the whole loan portfolio)                             

  • Location    

SpareBank 1 Boligkreditt AS utilizes the SpareBank 1 Alliance's IT platform and custom developed IT systems for the acquisition of loans from the banks in the SpareBank 1 Alliance. Credit risk is monitored by measuring the development of the mortgage portfolio's credit quality, details about missed payments, defaults and over the limit withdrawals.  For defaults and losses in the portfolio the Company has set the following limits:                          

  • Maximum probability of default for the portfolio:  0.75 %                             

  • Expected loss in the portfolio:  < 0.05 % of the loan volume                           

  • Unexpected loss in the portfolio (at a 99.97% confidence level):  < 0,5 % of the loan volume                                                    

The following risk classification, step 1 to 3 is executed monthly based on objective data                            

1.Probability of default (PD): The customers are classified in PD classes depending on the likelihood for default within the next 12 months based on a long average (through cycle). The PD is calculated on the basis of historical dataseries for financial key numbers tied to income and source of income, as well as on the basis of non-financial criteria such as age and behaviour. In order to group the customers according to PD, nine classes of probability of default are used (A to I). In addition the Company has to default classes (J and K) for customers with defaulted and/or written down exposures.                            

2. Exposure at default: This is a calculated number which provides the exposure with a customer at the point of default. This exposure is usually of lending volume and the approved but not utilized credit lines.  Customers approved but not utilized credit lines are multiplied with a 100 per cent conversion factor.                             

3. Loss given default (LGD): This is a calculated number which expresses how much the Company potentially stands to lose if a customer defaults on his or her obligations. The assessment takes into consideration the collateral and the cost the Company could incur by foreclosing and collecting on the defaulted exposure. The Company determines the realizable value on the collateral based on the experience of the SpareBank 1 banks over time, and so that the values reflect a cautious assessment in the lower point of an economic cycle. Seven classes (1 to 7) are used to classify the exposures according to LGD.                             

SpareBank 1 Boligkreditt AS will only purchase loans from the shareholder banks that have a high servicing capacity and low loan to value. This implies that the loans bought by the Company are in lower risk groups. The Company utilizes the same risk classification as the other banks in the SpareBank 1 Alliance. Presented below is an overview that shows how loans are allocated over the risk groups. The allocation in risk groups is based on expected loss (PD multiplied by LGD for each individual loan). 

Definition of risk groups - based on probability of default

      Distribution in % Total lending *
Risk group Lower limit Upper limit 2019 2018 2019 2018
Lowest 0.00 % 0.01 % 85.19 % 85.37 % 162,972,832 156,868,512
Low 0.01 % 0.05 % 10.71 % 10.96 % 20,490,523 20,142,820
Medium 0.05 % 0.20 % 2.73 % 2.35 % 5,224,346 4,325,581
High 0.20 % 0.50 % 0.65 % 0.68 % 1,248,371 1,246,661
Highest 0.50 % 100 % 0.72 % 0.63 % 1,373,270 1,166,695
Total     100.00 % 100.00 % 191,309,342 183,750,269

* Total exposures are presented as exposure at default exclusive of accrued interest and before group loan loss provisions. Loans to and deposits with credit institutions SpareBank 1 Boligkreditt only has deposits with financial institutions rated A-/A2 or higher as of 31.12.2019

Bonds and certificates

Rating class         2019 2018
AAA/Aaa Covered Bonds       21,249,000 15,181,397
  Norw. Government s-t debt       64,864 299,520
  Other government or gov guaranteed bonds       5,639,985 9,522,626
  Financial institutions          
  Total       26,953,849 25,003,543
AA+/Aa1 to AA-/Aa3 Other government bonds       1,061,930 268,368
  Covered Bonds       51,322 0
Financial institutions         8,852,807 11,671,094
  Total       9,966,059 11,939,462
A+/A1 - A/A2 Financial institutions       948,443 1,318,910
  Total       948,443 1,318,910
  Total       37,868,351 38,261,914

Fitch/Moody's/S&P rating classes are used. If the ratings differ, the lowest counts. All bonds are publicly listed. Financial derivatives Derivative contracts are only entered into with counterparties with a certain minimum rating by Moody's Ratings Service. Counterparties must post cash collateral. SpareBank 1 Boligkreditt does not post collateral to a counterparty which has previously not been received.

Note 24 Liquidity Risk

Liquidity risk is defined as the risk that the business is not able to meet its obligations at maturity.

SpareBank 1 Boligkreditt AS issues covered bonds at shorter maturities than the residential mortgages which make up the largest portion of assets on the Company’s balance sheet. The Liquidity risk which arises is closely monitored and is in compliance with the Norwegian covered bond legislation which amongst other things requires that the cash flow from the cover pool is sufficient to cover outgoing cash flows for holders of preferential claims on the cover pool (holders of covered bonds and counterparties in associated hedging contracts (swaps). In order to manage the liquidity risk certain limits and liquidity reserves have been approved by the Board of Directors. SpareBank 1 Boligkreditt AS maintains a liquidity reserve which will cover bond maturities for the next six months according to the proposed Harmonized Legislation for Covere Bonds. Liquidity risk is monitored on a regular basis and weekly reports are presented to the management and monthly reports to the Board.            

Boligkreditt's shareholder banks have committed themselves to buying covered bonds in a situation where the primary market for issuance of covered bonds is not functioning. The banks can use covered bonds as collateral with the central bank  at any time. The Company may require its shareholder banks to acquire covered bonds from it in an amount which is capped at the amount of the next 12 months upcoming maturities less what the Company holds as its own liquidity reserve. Each shareholder bank's responsibility is pro rata in accordance with its  ownership stake in the Company and secondary up to a level of twice its pro rata stake if other banks are unable or unwilling to meet their commitment. Each bank may make a deduction in its commitment for bonds already purchased under this commitment. The table below include expected interest payments, which makes the figures higher than the correspondnig numbers in the balance sheet.

Liquidity Risk - all amounts in 1000 NOK

  31.12.2019 No set term Maturity 0 to 3 months Maturity 3 to 12 months Maturity 1 to 5 years Maturity more than 5 years
Certificates and bonds 28,067,101 - 5,367,472 6,423,855 15,462,298 813,476
Lending to and deposits with credit institutions 9,801,250 2,549,322 - - 6,892,095 359,833
Residential mortgage loans 272,128,147 - 1,461,947 4,340,096 22,602,071 243,724,033
Derivatives 16,254,454 - 1,691,795 2,400,376 9,067,204 3,095,078
Other assets with no set term 189,198 189,198 - - - -
Total Assets 326,440,150 2,738,520 8,521,213 13,164,328 54,023,669 247,992,420
Debt incurred when issuing securities -253,713,303 - -13,161,128 -17,020,747 -139,013,993 -84,517,434
Other liabilities with a set term -12,418,140 - -12,418,140 - - -
Derivatives -1,420,374 - -16,259 -22,543 -222,881 -1,158,691
Subordinated debt -1,433,439 - - - - -1,433,439
Other liabilities -398,446 -398,446 - - - -
Equity -12,280,868 -12,280,868 - - - -
Total liabilities and equity -281,664,571 -12,679,315 -25,595,527 -17,043,291 -139,236,874 -87,109,564
Net total all items   -9,940,795 -17,074,314 -3,878,963 -85,213,205 160,882,856

Liquidity Risk - all amounts in 1000 NOK

  31.12.2018 No set term Maturity 0 to 3 months Maturity 3 to 12 months Maturity 1 to 5 years Maturity more than 5 years
Loans to credit institutions 38,261,914 3,484,993 9,534,075 4,563,771 20,065,992 613,083
Residential mortgage loans 254,414,174 - 1,283,825 3,790,611 19,669,530 229,670,208
Derivatives 23,183,793 - 3,119,376 3,747,152 13,766,134 2,551,132
Other assets with no set term 1,750 1,750 - - - -
Total Assets 315,861,631 3,486,743 13,937,276 12,101,534 53,501,656 232,834,423
Debt incurred when issuing securities -225,769,236 - -13,936,911 -23,871,498 -144,055,763 -43,905,062
Other liabilities with a set term -18,733,053 - -18,733,053 - - -
Derivatives -1,042,108 - -1,174,639 912,947 -302,491 -477,926
Liabilities with no set term -205,643 -205,643 - - - -
Subordinated debt -1,606,160 - - - - -1,606,160
Equity -11,583,366 -11,583,366 - - - -
Total liabilities and equity -258,939,566 -11,789,009 -33,844,604 -22,958,551 -144,358,254 -45,989,148
Net total all items   -8,302,266 -19,907,328 -10,857,016 -90,856,598 186,845,276

Note 25 Interest Rate Risk

The interest rate risk is the risk of a negative profit effect due to rate changes.

The balance sheet of SpareBank 1 Boligkreditt consists in all essence of loans to retail clients with a variable interest rate that can be changed after a 6 week notice period, floating rate current deposits, bonds and certificates in the Company's liquidity portfolio and of issued  bonds and certificates. In accordance with the Norwegian legislation applicable to Covered Bonds and internal guidelines, SpareBank 1 Boligkreditt hedges all interest rate risk by utilising interest rate swaps. The Board approves limits for interest rate risk for different terms. Reports to the Board are presented on a monthly basis. The table below reports the effect on market value in NOK for one per cent change in interest rates for the Company’s portfolios of mortgages, derivatives and issued bonds. The interest rate sensitivity shows the expected effect from a 100 basis points parallel shift in the interest rate curve:                        

The table below include expected interest payments, which makes the figures higher than the correspondnig numbers in the balance sheet.

Interest rate risk - all amounts in 1 000 NOK

  31.12.2019 No set term Maturity 0 to 3 months Maturity 3 to 12 months Maturity 1 to 5 years Maturity more than 5 years
Certificates and bonds 28,067,101 - 15,248,167 6,623,852 5,617,128 577,954
Lending to and deposits with credit institutions 9,801,250 2,549,322 6,892,095 359,833 - -
Residential mortgage loans 272,128,147 - 272,128,147 - - -
Other assets with no set term 189,198 189,198 - - - -
Total Assets 310,185,696 2,738,520 294,268,409 6,983,685 5,617,128 577,954
Debt incurred when issuing securities -253,713,303 - -60,046,791 -12,941,127 -96,417,976 -84,307,409
Other liabilities with a set term -12,418,140 -12,418,140 - - - -
Liabilities with no set term -398,446 -398,446 - - - -
Subordinated debt -1,433,439 - - - - -1,433,439
Equity -12,280,868 -12,280,868 - - - -
Total liabilities and equity -280,244,197 -25,097,454 -60,046,791 -12,941,127 -96,417,976 -85,740,848
Net interest rate risk            
before derivatives 29,941,499 -22,358,935 234,221,618 -5,957,442 -90,800,848 -85,162,894
Derivatives 14,834,080 - -137,643,978 8,363,656 82,444,360 61,670,043
Net interest rate risk   -22,358,935 96,577,640 2,406,214 -8,356,488 -23,492,852
% of total assets   7 % 30 % 1 % 3 % 7 %

Interest rate risk - all amounts in 1 000 NOK

  31.12.2018 No set term Maturity 1 to 3 months Maturity 3 to 12 months Maturity 1 to 5 years Maturity more than 5 years
Loans to credit institutions 38,261,914 - 16,731,647 4,073,168 16,912,910 544,189
Residential mortgage loans 254,414,174 - 254,414,174 - - -
Other assets with no set term 1,750 1,750 - - - -
Total Assets 292,677,838 1,750 271,145,821 4,073,168 16,912,910 544,189
Debt incurred when issuing securities -225,769,236 - -64,116,430 -17,169,791 -100,941,135 -43,541,879
Other liabilities with a set term -18,733,053 -18,733,053 - - - -
Liabilities with no set term -205,643 -205,643 - - - -
Subordinated debt -1,606,160 - - - - -1,606,160
Equity -11,583,366 -11,583,366 - - - -
Total liabilities and equity -257,897,458 -30,522,062 -64,116,430 -17,169,791 -100,941,135 -45,148,039
Net interest rate risk            
before derivatives 34,780,381 -30,520,312 207,029,391 -13,096,623 -84,028,225 -44,603,850
Derivatives 22,141,685 - -115,911,474 11,240,983 85,320,260 41,491,917
Net interest rate risk   -30,520,312 91,117,917 -1,855,640 1,292,034 -3,111,933
% of total assets   10 % 31 % 1 % 0 % 1 %

The table below presents a net change in market value in NOK for all the Company's asset and liabilities given a one per cent parallel move of the interest rate curve.

            Sensitivity of net interest rate expense in NOK 1000
Currency Change in basis points         2019 2018
NOK 100         51,345 74,394

Mortgage rates (variable) are set by SpareBank 1 Boligkreditt AS, but for all practical purposes follow the recommendations from the . local originating banks. The mortgage interest rates are set dependent on collateral and LTV, customer risk category and the competitive mortgage lending landscape.

Note 26 Currency Risk

The foreign exchange risk is the risk of a negative P&L impact as a result of changes in foreign currencies.

SpareBank 1 Boligkreditt AS’s balance sheet consists mainly of lending to private individuals in Norway and in NOK, current deposits in NOK and liabilities issued in the Norwegian or international capital markets. In accordance with the Norwegian covered bond legislation and its internal guidelines the Company hedges all currency risk, either by the utilisation of swaps or by way of asset liability management, i.e. maintaining exposures in assets and liabilities of the same currency. Weekly risk reports are created by the management team and reports to the Board of Directors have a monthly frequency. The currency risk (sensitivity to currency movements) are calculated by adding the exposure in the various currencies. No other currencies than the NOK had a material net position on the Company's balance sheet at the end of the year.

Net currency exposure in NOK 1 000

Currency 2019 2018
EUR -244,605 53,297
- Bank Deposits 344 73,092
- Issued Bonds -148,917,683 -130,451,000
- Derivatives 140,542,218 123,042,469
- Bond investments 8,130,516 7,388,736
USD 4 5,948
- Bank Deposits 4 5,842
- Issued Bonds - -10,707,438
- Derivatives - 10,707,543
- Bond investments    
SEK - -
- Bank Deposits - -
- Issued Bonds -251,812 -264,420
- Derivatives 251,812 264,420
- Bond investments - -
GBP 164 1,280
- Bank Deposits 198 1,139
- Issued Bonds -8,706,679 -8,382,733
- Derivatives 8,706,646 8,382,874
- Bond investments - -
Total 300,156 60,524

P&L effect before tax. in NOK 1000

Currency 2019 2018
EUR -24,461 5,330
USD 0 595
SEK 0 -
GBP 16 14
Total -24,444 5,924

Note 27 Operational Risk

Operational risk is defined as the risk of loss due to error or neglect in transaction execution, weakness in the internal control or information technology systems breakdowns.

Reputational, legal, ethical and competency risks are also elements of operational risk.

The operational risk in SpareBank 1 Boligkreditt AS is limited. The Company is only involved in lending for residential real estate purposes, the placement of liquid assets in highly rated and liquid bonds and the financing of these activities.

Several of the operational processes and systems are supplied by third parties and the Company uses standardized systems for its own operations, such as Simcorp Dimension, for portfolio registration and valuation functions for liquid assets and debt issuances. Several tasks have been outsources to SpareBank 1 SR-Bank, which is a larger organization with overlaps with the systems and tasks of the Company within several treasury functions. The Company also cooperates closely with its other larger parent banks. Evry is the provider of basic bank IT functions, as it is for most banks in Norway and all banks within the SpareBank 1 Alliance. The Evry systems manage the informational data with regards to each individual loan and calculates interest rate payments, installments due and in SpareBank 1 Boligkreditt’s case also provisions due to parent banks on mortgage loans sold and transferred to the Company. Any potential changes and/or additions in the operations of the Company will be vetted thoroughly before implementation. The Company annually holds a risk-works shop to discuss and look for risks and improvements in any aspects of the operational systems.  The Company’s management and control of operational risks are satisfactory.

Based on these facts there are no reasons which would lead to a different conclusion than that the standard method for the calculation of capital for operational risks are required. The Company therefore applies the standard method under the capital adequacy rules (CRD IV, Pillar 1) as method to calculate the operational risk capital requirement.  The capital so calculated amounts to 59.5 million for 31.12.2019 (see also the note for capital adequacy

Note 28 Asset coverage test

The asset coverage is calculated according to the Financial Services Act § 2-31 (Covered Bond Legislation).

There is a difference between this asset coverage test and the amounts in the balance sheet; for the purposes of the test mortgage loans which may have migrated above the 75% loan to value level are adjusted. Only that part of the mortgage loan corresponding to a loan to value up to 75% of the collateral is considered. Market values are used for all substitute collateral in the test. In addition any defaulted loans, i.e. loans in arrears at or beyond 90 days, are excluded from the test.

NOK 1 000 2019 2018
Total Covered Bonds 217,833,870 211,466,729
Residential mortgage loans 190,250,177 182,916,170
Lending to the public sector (gov. bonds/certificates or gov. guaranteed debt) 357,901 2,443,614
Reverse repo/ depo less than 100 days 5,254,080 9,337,374
Exposure to covered bonds 15,521,382 7,829,441
Derivatives 15,379,500 22,612,398
Total Cover Pool 226,763,040 225,138,997
Asset-coverage 104.1 % 106.5 %
Liquidity Coverage Ratio (LCR) 2019 2018
Liquid assets 14,680,356 10,054,367
Cash outflow next 30 days 12,605,694 1,061,996
LCR ratio 116.5 % 946.7 %
Net Stable Funding Ratio (NSFR) 2019 2018
Available amount of stable funding 206,882,321 202,019,676
Required amount of stable funding 198,323,077 191,375,955
NSFR ratio 104.3 % 105.6 %

Note 29 Capital adequacy

The primary goal for the Company's management of capital reserves is to ensure compliance with laws and regulatory requirements and maintain solid financial ratios and a high quality credit assessment in order to best support its business.

Transitional rules have been implemented by the FSA whereby regulated financial institutions with approved IRB models will not be able to fully benefit from the results of such models. Regulated entities are allowed to reduce by 20% the total sum of risk weighted assets which would otherwise have been in place under the previous Basel I framework.

CRD IV is implemented in Norway. The requirement of 17.5% total capital for SpareBank 1 Boligkreditt includes:

  • Minimum core equity Pillar 1: 4.5 per cent.
  • Additional Tier 1 equity capital 1.5 per cent. and additiponal Tier 2 capital 2.0 per cent (can be held as Tier 1 and Tier 2, alternatively as core equity capital)
  • Conservation buffer: 2.5 per cent core capital
  • Systemic risk buffer: 4,5 per cent. core equity
  • Countercyclical buffer: 2,5 per cent. core equity

The Issuer has an additional Pillar 2 requirement which is 0.8 per cent. core equity capital. The total requirement for the Issuer is therefore to have capital of minimum 18.3 per cent. of risk weighted assets. With a management buffer added, the target for capital coverage is 18.7 per cent. as of year-end 2019.

The Company's parent banks have committed themselves to keep the Company's Equity Tier 1 capital at the minimum regulatory level (in the Shareholders Agreement). Primarily this commitment is pro rata according to the ownership stakes in the Company, but it is a joint and several undertaking if one or more ownership banks are unable to comply, up to the maximum of twice the initial pro rata amount.

Capital. NOK 1 000 2019 2018
Share capital 7,610,548 7,190,548
Premium share fund 3,807,922 3,597,922
Other equity capital -317,602 -385,104
Common equity 11,010,302 10,403,366
Intangible assets -379 -707
Declared share dividend -90,566 -
100% deduction of expected losses exceeding loss provisions IRB (CRD IV) -420,879 -363,428
Prudent valuation adjustment (AVA) -16,639 -15,182
Core equity capital 10,572,405 10,024,049
Hybrid bond 1,180,000 1,180,000
Tier 1 equity capital 11,752,405 11,204,049
Supplementary capital (Tier 2) 1,425,000 1,600,000
Total capital 13,177,405 12,804,049

Note 29.3

Minimum requirements for capital. NOK 1 000 2019 2018
Credit risk 3,711,268 3,362,169
Market risk - -
Operational risk 59,537 62,185
Depreciation on groups of loans - -
CVA Risk 329,561 308,572
Difference in capital requirement resulting from transitional floor - 2,378,276
Minimum requirement for capital 4,100,367 6,111,202

Capital coverage

  2019 2018
Risk-weighted assets incl. transitional floor 78,028,001 76,390,017
Capital coverage (requirement w/all buffers. 18.3%) 25.71 % 16.76 %
Tier 1 capital coverage (requirement w/all buffers. 16.3%) 22.93 % 14.67 %
Core capital coverage (requirement w/all buffers. 14.8%) 20.63 % 13.12 %
Leverage ratio (requirement 3%) 5.05 % 4.91 %

Note 30 Related parties

The Company has 191 309 MNOK loans to customers. These are loans acquired from shareholder banks at market values (i.e. nominal value).

SpareBank 1 SR-Bank ASA
The Company purchases a substantial amount of their support functions from SpareBank 1 SR-Bank ASA. A complete SLA is established between the Company and SpareBank 1 SR-Bank ASA.

SpareBank 1 - Alliance
In addition the Company has a Transfer and Servicing agreement in place with each individual shareholder bank regulating amongst other things the servicing of mortgage loans.

SpareBank 1 Næringskreditt AS
All employees within SpareBank 1 Boligkreditt AS are also to various degrees working for SpareBank 1 Næringskreditt AS. Twenty percent of the administrative expenses in SpareBank 1 Boligkreditt AS to be charged to SpareBank 1 Næringskreditt AS. This division of administrative expenses between the two companies reflect the actual resources utilisation in SpareBank 1 Boligkreditt AS

Note 31 Collateral received


SpareBank 1 Boligkreditt has signed ISDA-agreements including CSAs (Credit Support Annexes) with a number of financial institutions that are counterparties in interest rate and currency swaps. These institutions post collateral in the form of cash deposits to SpareBank 1 Boligkreditt. At the end of the period 31.12.2019 this collateral amounted to NOK 12 418 million. This amount is included in the balance sheet, but represents restricted cash.  According to signed ISDA and CSA agreement, it is not permitted for the parties in derivatives transactions to net amounts amongst various transactions.

Note 32 Contingencies and Events after the Balance Sheet Date


SpareBank 1 Boligkreditt AS is not a party to any ongoing legal proceedings.

No events have taken place after the balance sheet date which are expected to have any material impact on the financial statements as of the end of the period 31.12.2019.