Boligkreditt

Note 1 Accounting principles

1.1 Basis for preparation
SpareBank 1 Boligkreditt AS 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.

These quarterly accounts for SpareBank 1 Boligkreditt refers to the period 01.01.2016 - 30.06.2016.  The accounts have been produced in accordance with IAS 34 reporting for a partial year. The accounts are prepared in accordance with IFRS and IFRIC interpretations thereof.  The Company's accounting principles and calculation methods have not materially changed since the annual accounts for 2015.  The principles adressed below should be seen in connection with the accounting principles as they were presented in the annual accounts for 2015. 

These financial accounts have been approved by the Board of Directors of SpareBank 1 Boligkreditt on 05.08.2016                                                     

1.2 Segment
Business segments are the Company's primary reporting segment.  The Company has only one segment, which is the retail customer segment.  The segment consists of lending to private individuals and all loans have been acquired from the member banks of the SpareBank 1 alliance.  The Company's total results as of the second quarter 2016 is therefore equal to the retail segment total results.                                                 

1.3 Presentational 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.                                                     

1.4 Risk Management
SpareBank 1 Boligkreditt AS' financial assets and liabilities fluctuates in value as a result of the variability of prices of such assets and liabilities in the financial markets. In the annual accounts for 2015 Note 3 this risk and management thereof is more closely discussed.

1.5 Estimates and assessments regarding the use of accounting principles
The preparation of the financial information is in accordance with IFRS and involves management's estimates which affect the implementation of accounting principles and thereby accounting values for assets, liabilities, revenue and costs. These estimates have been described in the notes to the annual accounts for 2015.

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Note 2 Net Interest Income

NOK 1 000	30.06.2016	30.06.2015	2015
Interest income
Interest income and similar income from loans to and balances with credit institutions	251,353	144,456	300,398
Interest income and similar income from loans to and balances with customers	2,298,496	2,749,183	5,258,746
Interest income treasury bills	10,206	1,917	7,849
Commission expense (payable to shareholder banks) *	-676,681	-902,852	-1,687,085
Total interest income	1,883,373	1,992,704	3,879,909
Interest expense
Interest expense and similar expenses to credit institutions	8,851	19,619	31,291
Interest expense and similar expenses on issued bonds	1,606,410	1,734,358	3,359,422
Interest expense and similar expenses on issued certificates	2,097	1,735	1,735
Interest expense and similar expenses on Tier 2 capital	46,163	37,995	80,584
Other interest expenses	73	11	19
Total interest expense	1,663,595	1,793,717	3,473,052
Net interest income	219,778	198,987	406,857

 

* Commissions to our parent banks are calculated daily for each mortgage loan transferred. whereby the commission equals the customer loan rate less a rate which incorporates the Company's average cost of funding and operational costs. The operational add-on element is expressed through an average rate which is from time to time decided by the Company's Board of Directors.

 

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Note 3 Net Gains on Financial Instruments

NOK 1 000	30.06.2016	30.06.2015	2015
Net gains (losses) from financial liabilities. hedged instruments (1)	-4,673,830	371,804	-408,266
Net gains (losses) from financial assets. hedged instruments (2)	-287,883	-171,068	-34,613
Net gains (losses) from financial derivatives. hedging. at fair value. hedging instrumet (1.3)	4,830,716	-279,843	209,580
Net gains (losses) due to changes in basisswapspreads (4)	53,299	286,446	467,146
Netto gains (losses)	-77,698	207,339	233,848

 

(1) The Company utlilizes 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. 

(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. The latter are valued according to interest rate and foreign exchange rates and are also 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).  A smaller part of the portfolio is classified as hold-to-maturity and consist of bonds in Norwegian kroner at floating rates. 

(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. 

(4) The Company utliizes basis swaps, which is the foreign exchange swap that changes foreign currency exposure into Norwegian kroner exposure, and this is entered into at a certain cost (spread over 3 months NIBOR).  The change in the spread is used to adjust the valuation of all of the outstanding basis swaps each quarter, along with the change in other transaction charges to enter into the swaps.  An increase in the costs for basis swaps results in a positive adjustment (gain), while a reduction in basis swap costs lead to a negative adjustment (loss).  The effect of the basis swap valuation adjustments can be material from quarter to quarter because the Company's portfolio of swaps is extensive.  All basis swap valuation adjustments will reverse in line the with the passage of time and will become zero at the latest at the point of the scheduled swap termination date

 

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Note 4 Salaries and Remuneration

NOK 1 000	30.06.2016	30.06.2015	2015
Salary	4,787	5,104	10,726
Salaries reinvoiced to SpareBank1 N	-1,674	-2,624	-3,108
Pension expenses	1,077	916	706
Social insurance fees	797	872	1,736
Other personnel expenses	156	400	640
Total salary expenses	5,143	4,669	10,700
Average number of full time equivalents (FTEs)	8	7	8

 

* 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. The company also buys administrative services from SpareBank 1 SR-Bank ASA and SpareBank 1 Gruppen. Pension benefit obligations are covered in SpareBank 1 Boligkreditt through participation in the pension fund of SpareBank 1 SR-Bank ASA.  This pension scheme meets the legal demands on mandatory occupational pension.  

 

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Note 5 Administration Expenses

NOK 1 000	30.06.2016	30.06.2015	2015
IT operation and maintenance	4,735	5,065	9,705
Travel	411	479	1,087
Telephone and postage	29	72	163
Misc other adm expenses	8	1	10
Cost share with SpareBank 1 Næringskreditt AS	-163	-372	-340
Total	5,021	5,245	10,625

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Note 6 Other Operating Expenses

NOK 1 000	30.06.2016	30.06.2015	2015
Auditing. hired personnel from SpareBank 1 Group. other services	4,370	4,294	9,062
Operating expenses rented offices	294	285	675
Operating expenses reinvoiced to SpareBank 1 Næringskreditt	-254	-295	-462
Misc other operating expenses	300	43	486
Total	4,711	4,327	9,760

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Note 7 Other Assets

NOK 1 000	30.06.2016	30.06.2015	2015
Intangible Assets	1,722	2,728	1,880
Account Reveivables from SpareBank 1 Næringskreditt AS	111	968	1,791
Total	1,833	3,696	3,671

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Note 8 Lending to Customers

Lending to customers are residential mortgages only. The mortgages generally have a loan lon-to-value and losses have been very low. The total amout of lending to customers at the end of the period were NOK 172.6 billion. All mortgages carry a variable interest rate.

NOK 1 000	30.06.2016	30.06.2015	2015
Revolving loans - retail market	54,697,466	54,002,808	54,205,342
Amortising loans - retail market	117,789,470	106,918,328	114,989,151
Accrued interest	136,844	158,743	152,202
Total loans before specified and unspecified loss provisions	172,623,781	161,079,879	169,346,696
Specified loan loss provisions	0
Unspecified loan loss provisions	7,708	7,708	7,708
Total net loans and claims with customers	172,616,073	161,072,171	169,338,988
Liability
Unused balances under customer revolving credit lines (flexible loans)	14,887,140	19,550,411	18,636,235
Total	14,887,140	19,550,411	18,636,235
Defaulted loans
Defaults*	0.0%	0.0%	0.0%
Specified loan loss provisions	0.0%	0.0%	0.0%
Net defaulted loans	0.0%	0.0%	0.0%
Loans at risk of loss
Loans not defaulted but at risk of loss	0.0%	0.0%	0.0%
- Write downs on loans at risk of loss	0.0%	0.0%	0.0%
Net other loans at risk of loss	0.0%	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.

 

Changes to loan loss provisions

NOK 1 000	30.06.2016	30.06.2015	2015
Loan loss provisions starting balance	7,708	7,708	7,708
Change in group loan loss provisions	0	0	0
Loan loss provisions ending balance	7,708	7,708	7,708

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Note 9 Equity capital and shareholders

Shareholders registry as of 30.06.2016

	No. Of shares	Onwership	Vote
SpareBank 1 SMN	11,703,383	18.97 %	18.97 %
SpareBank 1 SR-Bank ASA	10,300,113	16.69 %	16.69 %
SpareBank 1 Nord-Norge	8,918,628	14.45 %	14.45 %
Sparebanken Hedmark	6,143,099	9.96 %	9.96 %
Bank 1 Oslo Akershus AS	5,971,066	9.68 %	9.68 %
BN Bank ASA	3,669,869	5.95 %	5.95 %
SpareBank 1 BV	2,763,870	4.48 %	4.48 %
SpareBank 1 Østfold Akershus	2,638,883	4.28 %	4.28 %
Sparebanken Telemark	2,448,910	3.97 %	3.97 %
SpareBank 1 Ringerike Hadeland	2,014,421	3.26 %	3.26 %
SpareBank 1 Nordvest	1,288,058	2.09 %	2.09 %
SpareBank 1 Søre Sunnmøre	788,447	1.28 %	1.28 %
Modum Sparebank	749,882	1.22 %	1.22 %
SpareBank 1 Nøtterøy Tønsberg	742,104	1.20 %	1.20 %
SpareBank 1 Hallingdal	694,306	1.13 %	1.13 %
SpareBank 1 Gudbrandsdal	501,360	0.81 %	0.81 %
Lom og Skjåk Sparebank	369,083	0.60 %	0.60 %
Total	61,705,482	100 %	100 %

 

The equity capital consists of 61 705 482 shares with a face value of NOK 100 each

 

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Note 10 Liabilities incurred by issuing securities

NOK 1 000				Nominal value* 30.06.2016	Nominal value 30.06.2015	Nominal value 2015
Short term notes. unsecured				950,000	-	-
Repurchased short term notes. unsecured				-	-	-
Senior unsecured bonds				3,631,000	6,741,000	6,476,000
Repurchased senior unsecured bonds				-282,000	-	-74,000
Covered bonds				184,961,507	152,574,717	177,244,869
Repurchased Covered bonds				-3,635,195	-4,333,800	-4,917,100
Total debt incurred by issuing securities				185,625,312	154,981,917	178,729,769

 

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

 

NOK 1 000				Book value 30.06.2016	Book value 30.06.2015	Book value 2015
Short term notes. unsecured				949,966	-	-
Repurchased short term notes. unsecured				-	-	-
Senior unsecured bonds				3,630,435	6,740,452	6,475,779
Repurchased senior unsecured bonds				-280,870	-	-73,998
Covered bonds				215,798,777	178,011,165	215,868,978
Repurchased covered bonds				-3,870,060	-4,509,042	-5,125,020
Activated costs incurred by issuing debt				-159,745	-129,424	-158,707
Accrued interest				1,529,119	1,463,891	1,866,571
Total debt incurred by issuing securities				217,597,621	181,577,042	218,853,602

 

Liabilities categorized by debt instrument and year of maturity (nominal value*. net of repurchased bonds) NOK 1.000:

 

Senior Unsecured Bonds

Due in	30.06.2016	30.06.2015	2015
2015	-	265,000	-
2016	500,000	3,826,000	3,752,000
2017	2,618,000	2,650,000	2,650,000
2018	300,000
2019	881,000
Total	4,299,000	6,741,000	6,402,000

Covered bonds

Due in	30.06.2016	30.06.2015	2015
2015	-	445,000	-
2016	10,345,000	23,599,625	20,621,625
2017	19,877,500	21,013,000	21,013,000
2018	35,754,250	21,785,000	35,754,250
2019	27,550,128	25,367,170	27,167,690
2020	24,958,500	24,458,500	24,958,500
2021	28,505,307	24,181,208	25,402,456
2022	18,698,750	3,233,750	12,648,750
2023	9,374,900	-	-
2024	1,558,327	1,334,864	1,462,848
2025	1,010,000	1,010,000	1,010,000
2026	1,935,000	1,650,000	1,650,000
2027	475,850	-	475,850
2028	1,282,800	162,800	162,800
Total	181,326,312	148,240,917	172,327,769
Total	185,625,312	154,981,917	178,729,769

 

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

 

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

NOK 1 000				30.06.2016	30.06.2015	2015
NOK				60,717,004	56,839,280	56,218,289
EUR				127,194,134	87,283,760	120,721,290
USD				29,407,367	37,196,579	41,625,965
SEK				279,115	257,423	288,058
Total				217,597,621	181,577,042	218,853,602

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Note 11 Subordinated Debt

NOK 1000	ISIN	Interest rate	Call option	Nominal amount	30.06.2016	30.06.2015	2015
With maturity
Subordinated debt (Tier 2 capital instrument)	NO0010704109	3M Nibor + 225 bp	07.05.2019	1,600,000	1,600,000	1,600,000	1,600,000
Perpetual
Hybrid (Tier 1 capital instrument)	NO0010713746	3M Nibor + 310 bp	09.05.2019	350,000	350,000	350,000	350,000
Hybrid (Tier 1 capital instrument)	NO0010745920	3M Nibor + 360 bp	23.09.2020	300,000	300,000	-	300,000
Hybrid (Tier 1 capital instrument)	NO0010746191	3M Nibor + 360 bp	29.09.2020	180,000	180,000	-	180,000
Hybrid (Tier 1 capital instrument)	NO0010767643	3M Nibor + 450 bp	22.06.2021	250,000	250,000	-	-
Accured interest					-	3999	4,380
Book value				2,680,000	2,680,000	1953999	2,434,380

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Note 12 Financial Derivatives

NOK 1 000	30.06.2016	30.06.2015	2015
Interest rate derivative contracts
Interest rate swaps
Nominal amount	79,229,257	72,500,831	80,539,030
Asset	5,701,627	5,261,916	5,345,413
Liability	-525,072	-674,746	-638,503
Currency derivative contracts
Currency swaps
Nominal amount	142,587,689	116,148,245	153,531,262
Asset	26,474,623	21,598,082	35,103,579
Liability	-50,607	-7,738	-51,812
Total financial derivative contracts
Nominal amount	221,816,946	188,649,076	234,070,292
Asset	32,176,250	26,859,998	40,448,992
Liability *	-575,679	-682,483	-690,315
All derivative contracts exist for the purpose of hedging changes in interest rates and currency exchange rates.
Asset	32,176,250	26,859,998	40,448,992
Net gain (loss) on valuation adjustment of basisswap spreads	552,050	318,050	498,751
Net asset derivatives	32,728,300	27,178,048	40,947,743

 

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 Comapny'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. 

 

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Note 13 Classification of Financial Instruments

NOK 1 000	Financial instruments accounted for at fair value *	Financial assets and debt accounted for at amortised cost	Financial assets held to maturity	Non-financial assets and liabilities	30.06.2016
Assets
Deposits at and receivables from financial institutions	-	11,257,916	-	-	11,257,916
Norwegian government short term debt certificates	1,656,360	-	-	-	1,656,360
Bonds	44,658,605	-	74,730	-	44,733,335
Lending to customers	-	172,616,073	-	-	172,616,073
Financial derivatives	32,728,300	-	-	-	32,728,300
Other assets	-	-	-	1,833	1,833
Total Assets	79,043,265	183,873,989	74,730	1,833	262,993,817
Liabilities
Debt incurred by issuing securities	175,957,449	41,640,171	-	-	217,597,621
Collateral received in relation to financial derivatives	-	31,632,419	-	-	31,632,419
Financial derivatives	575,679	-	-	-	575,679
Deferred taxes	-	-	-	370,561	370,561
Taxes payable	-	-	-	31,621	31,621
Subordinated dept	-	2,684,337	-	-	2,684,337
Other liabilities	-	-	-	133,917	133,917
Total Liabilities	176,533,129	75,956,927	-	536,099	253,026,155
Total Equity	-	-	-	9,967,662	9,967,662
Total Liabilities and Equity	176,533,129	75,956,927	-	10,503,760	262,993,816

 

*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	Financial assets held to maturity	Non-financial assets and liabilities	30.06.2015
Assets
Deposits at and receivables from financial institutions	-	13,049,194	-	-	13,049,194
Norwegian government short term debt certificates	19,926	-	-	-	19,926
Bonds	16,136,038	-	225,070	-	16,361,109
Lending to customers	-	161,072,171	-	-	161,072,171
Financial derivatives	27,178,048	-	-	-	27,178,048
Other assets	-	-	-	3,696	3,696
Total Assets	43,334,012	174,121,365	225,070	3,696	217,684,144
Liabilities
Debt incurred by issuing securities	140,659,914	40,917,128	-	-	181,577,042
Collateral received in relation to financial derivatives	-	24,404,974	-	-	24,404,974
Financial derivatives	682,483	-	-	-	682,483
Deferred taxes	-	-	-	234,604	234,604
Taxes payable	-	-	-	-	-
Subordinated dept	-	1,953,999	-	-	1,953,999
Other liabilities	-	-	-	275,084	275,084
Total Liabilities	141,342,397	67,276,101	-	509,688	209,128,186
Total Equity	-	-	-	8,555,958	8,555,958
Total Liabilities and Equity	141,342,397	67,276,101	-	9,065,646	217,684,144

 

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

 

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Note 14 Financial Instruments at Fair Value

General   
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 done through discounting future cash flows to their present values.  Valuation of currency swaps will also include the element of foreign exchange rates.

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

With effect from 2009 SpareBank 1 Boligkreditt AS has implemented the changes in IFRS 7 in relation to the valuation of financial instruments as of the date of the financial accounts. The changes require a presentation of the fair value measurement for each Level. We have the following three Levels for the fair value measurement:

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 30.06.2016

NOK 1 000	Level 1	Level 2	Level 3	Total
Bonds and bills	30,722,252	15,592,712	-	46,314,964
Financial Derivatives	-	32,728,300	-	32,728,300
Total Assets	30,722,252	48,321,012	-	79,043,264
Bonds	-	175,957,449	-	175,957,449
Financial Derivatives	-	575,679	-	575,679
Total Liabilities	-	176,533,129	-	176,533,129

The following table presents the company’s assets and liabilities at fair value as of 30.06.2015

NOK 1 000	Level 1	Level 2	Level 3	Total
Bonds and bills	12,950,483	3,205,482	-	16,155,964
Financial Derivatives	-	27,178,048	-	27,178,048
Total Assets	12,950,483	30,383,530	-	43,334,012
Bonds	-	140,659,914	-	140,659,914
Financial Derivatives	-	682,483	-	682,483
Total Liabilities	-	141,342,397	-	141,342,397

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Note 15 Bonds classified as Hold to Maturity

As of 30.06.2016

Bonds classified as	Book value 01.01.2016	Investments	Matured	Amortizing	Exchange rate effects	Amortized cost 30.06.2016
Hold to maturity	224,605	-	-150,000	125	-	74,731
Total certificates and bonds	224,605	-	-150,000	125	-	74,731

Market value of bonds in hold to maturity portfolio

Bonds classified as		Book value	Market value incl. currency effect	Effect on net inc if at fair vaue
Hold to maturity		74,731	75,089	-358
Total certificates and bonds		74,731	75,089	-358

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Note 16 Other Liabilities

NOK 1 000	30.06.2016	30.06.2015	2015
Employees tax deductions and other deductions	387	375	1,478
Employers national insurance contribution	306	316	462
Accrued holiday allowance	428	439	1,015
Commission payable to shareholder banks	105,225	132,389	117,921
Deposits*	6,753	11,250	12,977
Pension liabilities	12,823	18,860	12,360
Other accrued costs	7,995	5,878	9,902
Total	133,917	169,507	156,116

 

The Company does not have an overdraft facility or a revolving credit facility

* Deposits represents temporary balances paid in by customers in excess of the original loan amount

 

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Note 17 Asset coverage test

The asset coverage is calculated according to the Financial Services Act § 2-31 (Covered Bond Legislation). There is a discrepancy between the asset coverage test and the amounts in the balance sheet because for the purposes of the test mortgage loans which may have migrated above the 75% loan to value level are reduced to reflect the decrease in the value of the underlying collateral so that only a maximum loan corresponding to a value of 75% of the collateral is considered. Market values are used for all subsitute collateral in the test. In addition any defaulted loans, i.e. loans in arrears at or beyond 90 days, are excluded from the test (there have been no occurrences of any defaults starting with the commencement of operations through 30.06.2016).

NOK 1 000	30.06.2016	30.06.2015	2015
Covered Bonds	217,376,383	179,507,163	217,752,078
Repurchased Bonds	-3,927,714	-4,558,781	-5,155,728
Derivatives	-31,798,450	-26,263,573	-39,848,930
Total Covered Bonds	181,650,218	148,684,810	172,747,420
Lending to customers	172,207,775	160,790,206	168,792,683
Treasury Bills	24,943	19,926	7,210,022
Substitute collateral	25,790,424	4,910,351	14,664,356
Total Cover Pool	198,023,141	165,720,483	190,667,061
Asset-coverage	109,0 %	111,5 %	110,4 %

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Note 18 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.

A new capital requirements directive was introduced in Norway as of January 1, 2007 (Basel II). SpareBank1 Boligkreditt AS obtained permission from the Financial Services Authority in Norway (Finanstilsynet) for the implementation of its own Internal Ratings Based (IRB) model for credit risks from the seond quarter of 2009.

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.  The transitional rules lead  to significantly higher capital requirements than what would otherwise have been applicable under Basel II.

The European Union has approved new regulatory requirements, CRD IV.  The new regulations places more robust requirements on capital adequacy, capital structure, liquidity buffers and funding.  CRD IV is gradually introduced in Norway up until the end of 2016. The requirementof 15.0% total capital from July 1, 2016 includes a 11.5% Core Tier 1 capital and 3.5% other capital.

The Company's parent banks have committed themselves to keep the Equity Core Tier 1 capital at a minimum 9% (is currently being reviewed with a target to increase to 11%). 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	30.06.2016	30.06.2015	2015
Share capital	6,170,548	5,510,548	5,710,548
Premium share fund	3,087,922	2,757,922	2,857,922
Other equity capital	614,328	2,039	1,169,402
Common equity	9,872,798	8,270,509	9,737,872
Intangible assets	-1,722	-2,728	-1,880
Declared share dividend	-	-	-105,074
100% deduction of expected losses exceeding loss provisions IRB (CRD IV)	-315,593	-307,473	-326,724
Prudent valuation adjustment (AVA)	-79,694	-44,242	-83,752
Core equity capital	9,475,789	7,916,066	9,220,442
Hybrid bond	1,080,000	350,000	830,000
Tier 1 equity capital	10,555,789	8,266,066	10,050,442
Supplementary capital (Tier 2)	1,600,000	1,600,000	1,600,000
Total capital	12,155,789	9,866,066	11,650,442

Minimum requirements for capital. NOK 1 000	30.06.2016	30.06.2015	2015
Credit risk	3,169,337	2,929,842	3,122,194
Market risk	-	-	-
Operational risk	52,871	41,779	41,779
Depreciation on groups of loans	-	-	-
CVA Risk	127,595	118,611	165,228
Difference in capital requirement resulting from transitional floor	2,550,684	2,419,474	2,463,358
Minimum requirement for capital	5,900,487	5,509,706	5,792,559

Capital coverage

	30.06.2016	30.06.2015	2015
Risk-weighted assets incl. transitional floor	73,756,084	68,871,326	72,406,991
Capital coverage (%)	16,48 %	14,33 %	16,09 %
Tier 1 capital coverage (%)	14,31 %	12,00 %	13,88 %
Core Tier 1 capital coverage (%)	12,85 %	11,49 %	12,73 %

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Note 19 Related parties

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 are to 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

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Note 20 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 30.06.2016 this collateral amounted to NOK 31 632 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.

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Note 21 Contingencies and Events after 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 30.06.2016