Notes to accounts

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 - 30.09.2016.  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 25.10.2016   

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.    


Note 2 Net Interest Income

NOK 1 000 30.09.2016 30.09.2015 2015
 
Interest income
Interest income and similar income from loans to and balances with credit institutions 388,957 208,677 300,398
Interest income and similar income from loans to and balances with customers 3,405,653 4,029,793 5,258,746
Interest income treasury bills 8,713 2,449 7,849
Commission expense (payable to shareholder banks) * -977,674 -1,294,898 -1,687,085
Total interest income 2,825,648 2,946,021 3,879,909
 
Interest expense
Interest expense and similar expenses to credit institutions 8,075 26,117 31,291
Interest expense and similar expenses on issued bonds 2,416,106 2,549,733 3,359,422
Interest expense and similar expenses on issued certificates 5,565 1,735 1,735
Interest expense and similar expenses on Tier 2 capital 72,485 56,989 80,584
Other interest expenses 1,020 18 19
Total interest expense 2,503,250 2,634,592 3,473,052
 
Net interest income 322,398 311,429 406,857

* 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.


Note 3 Net Gains on Financial Instruments

NOK 1 000 30.09.2016 30.09.2015 2015
 
Net gains (losses) from financial liabilities. hedged instruments (1) -3,557,619 -839,343 -408,266
Net gains (losses) from financial assets. hedged instruments (2) -601,426 -28,891 -34,613
Net gains (losses) from financial derivatives. hedging. at fair value. hedging instrumet (1.3) 3,996,694 703,765 209,580
Net gains (losses) due to changes in basisswapspreads (4) -96,693 379,836 467,146
Netto gains (losses) -259,043 215,366 233,848

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


Note 4 Salaries and Remuneration

NOK 1 000 30.09.2016 30.09.2015 2015
 
Salary 7,666 7,824 10,726
Salaries reinvoiced to SpareBank1 N -2,311 -3,828 -3,108
Pension expenses 1,631 1,376 706
Social insurance fees 1,198 1,240 1,736
Other personnel expenses 119 465 640
Total salary expenses 8,303 7,077 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.      


Note 5 Administration Expenses

NOK 1 000 30.09.2016 30.09.2015 2015
 
IT operation and maintenance 7,238 7,281 9,705
Travel 473 725 1,087
Telephone and postage 85 106 163
Misc other adm expenses 8 1 10
Cost share with SpareBank 1 N -205 -450 -340
Total 7,598 7,664 10,625

Note 6 Other Operating Expenses

NOK 1 000 30.09.2016 30.09.2015 2015
 
Auditing. hired personnel from SpareBank 1 Group. other services 7,829 6,652 9,062
Operating expenses rented offices 447 427 675
Operating expenses reinvoiced to SpareBank 1 Næringskreditt -326 -461 -462
Misc other operating expenses 318 138 486
Total 8,268 6,756 9,760

Note 7 Other Assets

NOK 1 000 30.09.2016 30.09.2015 2015
 
Intangible Assets 1,510 2,275 1,880
Account Reveivables from SpareBank 1 Næringskreditt AS 753 2,416 1,791
Total 2,262 4,692 3,671

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 173,3 billion. All mortgages carry a variable interest rate.

NOK 1 000 30.09.2016 30.09.2015 2015
 
Revolving loans - retail market 53,822,598 54,058,759 54,205,342
Amortising loans - retail market 119,376,324 111,997,128 114,989,151
Accrued interest 137,449 153,028 152,202
Total loans before specified and unspecified loss provisions 173,336,371 166,208,914 169,346,696
Specified loan loss provisions 0
Unspecified loan loss provisions 7,708 7,708 7,708
Total net loans and claims with customers 173,328,663 166,201,206 169,338,988
 
Liability
Unused balances under customer revolving credit lines (flexible loans) 13,731,753 19,669,699 18,636,235
Total 13,731,753 19,669,699 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.

NOK 1 000 30.09.2016 30.09.2015 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

Note 9 Equity capital and shareholders

Shareholders registry as of 30.09.2016

No. Of shares Onwership Vote
 
SpareBank 1 SMN 12,006,847 18,97 % 18,97 %
SpareBank 1 SR-Bank ASA 10,567,191 16,69 % 16,69 %
SpareBank 1 Nord-Norge 9,149,885 14,45 % 14,45 %
Sparebanken Hedmark 6,302,387 9,96 % 9,96 %
Bank 1 Oslo Akershus AS 6,125,894 9,68 % 9,68 %
BN Bank ASA 3,765,027 5,95 % 5,95 %
SpareBank 1 BV 2,835,536 4,48 % 4,48 %
SpareBank 1 Østfold Akershus 2,707,308 4,28 % 4,28 %
Sparebanken Telemark 2,512,410 3,97 % 3,97 %
SpareBank 1 Ringerike Hadeland 2,066,654 3,26 % 3,26 %
SpareBank 1 Nordvest 1,321,458 2,09 % 2,09 %
SpareBank 1 Søre Sunnmøre 808,891 1,28 % 1,28 %
Modum Sparebank 769,326 1,22 % 1,22 %
SpareBank 1 Nøtterøy Tønsberg 761,346 1,20 % 1,20 %
SpareBank 1 Hallingdal 712,309 1,13 % 1,13 %
SpareBank 1 Gudbrandsdal 514,360 0,81 % 0,81 %
Lom og Skjåk Sparebank 378,653 0,60 % 0,60 %
Total 63,305,482 100 % 100 %

The equity capital consists of 63 305 482 shares with a face value of NOK 100 each


Note 10 Liabilities incurred by issuing securities

NOK 1 000 Nominal value* 30.09.2016 Nominal value* 30.09.2015 Nominal value* 2015
 
Short term notes. unsecured 950,000 - -
Repurchased short term notes. unsecured - - -
Senior unsecured bonds 3,631,000 6,701,000 6,476,000
Repurchased senior unsecured bonds -232,000 -38,000 -74,000
Covered bonds 193,760,232 161,367,960 177,244,869
Repurchased Covered bonds -3,889,085 -4,038,370 -4,917,100
Total debt incurred by issuing securities 194,220,147 163,992,590 178,729,769

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

NOK 1 000 Book value 30.09.2016 Book value 30.09.2015 Book value 2015
 
Short term notes. unsecured 949,959 - -
Repurchased short term notes. unsecured - - -
Senior unsecured bonds 3,630,568 6,700,618 6,475,779
Repurchased senior unsecured bonds -231,291 -38,036 -73,998
Covered bonds 218,297,071 197,254,281 215,868,978
Repurchased covered bonds -4,102,595 -4,248,583 -5,125,020
Activated costs incurred by issuing debt -175,849 -146,547 -158,707
Accrued interest 1,715,578 1,881,784 1,866,571
Total debt incurred by issuing securities 220,083,440 201,403,517 218,853,602

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

Senior Unsecured Bonds

Due in 30.09.2016 30.09.2015 2015
 
2015 - 225,000 -
2016 500,000 3,788,000 3,752,000
2017 2,668,000 2,650,000 2,650,000
2018 300,000 - -
2019 881,000 - -
Total 4,349,000 6,663,000 6,402,000

Covered bonds

Due in 30.09.2016 30.09.2015 2015
 
2016 10,252,000 22,360,625 20,621,625
2017 19,480,500 21,013,000 21,013,000
2018 35,754,250 21,785,000 35,754,250
2019 27,530,484 25,410,598 27,167,690
2020 24,958,500 24,458,500 24,958,500
2021 28,458,162 25,385,435 25,402,456
2022 18,698,750 12,648,750 12,648,750
2023 9,211,200 - -
2024 1,503,651 1,444,882 1,462,848
2025 1,010,000 1,010,000 1,010,000
2026 11,255,000 1,650,000 1,650,000
2027 475,850 - 475,850
2028 1,282,800 162,800 162,800
Total 189,871,147 157,329,590 172,327,769
 
Total 194,220,147 163,992,590 178,729,769

* 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 30.09.2016 30.09.2015 2015
 
NOK 59,885,435 56,133,687 56,218,289
EUR 131,672,207 104,415,444 120,721,290
USD 28,259,485 40,575,319 41,625,965
SEK 266,313 279,068 288,058
Total 220,083,440 201,403,517 218,853,602

Note 11 Subordinated Debt

NOK 1000 ISIN Interest rate Issued year Call option Nominal amount 30.09.2016 30.09.2015 2015
 
With maturity
Subordinated debt (Tier 2 capital instrument) NO0010704109 3M Nibor + 225 bp 2014 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 2014 09.05.2019 350,000 350,000 350,000 350,000
Hybrid (Tier 1 capital instrument) NO0010745920 3M Nibor + 360 bp 2015 23.09.2020 300,000 300,000 300,000 300,000
Hybrid (Tier 1 capital instrument) NO0010746191 3M Nibor + 360 bp 2015 29.09.2020 180,000 180,000 180,000 180,000
Hybrid (Tier 1 capital instrument) NO0010767643 3M Nibor + 450 bp 2016 22.06.2021 250,000 250,000 - -
Accured interest 4,461 4,246 4,380
Book value 2,680,000 2,684,461 2,434,246 2,434,380

Note 12 Financial Derivatives

NOK 1 000 30.09.2016 30.09.2015 2015
 
Interest rate derivative contracts
Interest rate swaps
Nominal amount 77,041,291 77,915,816 80,539,030
Asset 5,113,523 5,637,833 5,345,413
Liability -521,729 -381,431 -638,503
 
Currency derivative contracts
Currency swaps
Nominal amount 146,579,003 135,100,163 153,531,262
Asset 21,763,245 31,835,744 35,103,579
Liability -894,056 -11,567 -51,812
 
Total financial derivative contracts
Nominal amount 223,620,294 213,015,979 234,070,292
Asset 26,876,768 37,473,577 40,448,992
Liability * -1,415,786 -392,999 -690,315
All derivative contracts exist for the purpose of hedging changes in interest rates and currency exchange rates.
Asset 26,876,768 37,473,577 40,448,992
Net gain (loss) on valuation adjustment of basisswap spreads 402,058 411,440 498,751
Net asset derivatives 27,278,826 37,885,017 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.


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 30.09.2016
 
Assets
Deposits at and receivables from financial institutions 0 10,261,328 - - 10,261,328
Norwegian government short term debt certificates 2,596,035 - - - 2,596,035
Bonds 46,372,134 - 74,730 - 46,446,864
Lending to customers - 173,328,663 - - 173,328,663
Financial derivatives 27,278,826 - - - 27,278,826
Other assets - - - 2,262 2,262
Total Assets 76,246,995 183,589,991 74,730 2,262 259,913,978
 
Liabilities
Debt incurred by issuing securities 178,880,889 41,202,550 - - 220,083,440
Collateral received in relation to financial derivatives - 25,331,451 - - 25,331,451
Financial derivatives 1,415,786 - - - 1,415,786
Deferred taxes - - - 380,104 380,104
Taxes payable - - - - -
Subordinated dept - 2,684,461 - - 2,684,461
Other liabilities - - - 117,308 117,308
Total Liabilities 180,296,675 69,218,462 - 497,412 250,012,550
 
Total Equity - - - 9,901,428 9,901,428
 
Total Liabilities and Equity 180,296,675 69,218,462 - 10,398,840 259,913,978

*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 30.09.2015
 
Assets
Deposits at and receivables from financial institutions - 16,896,170 - - 16,896,170
Norwegian government short term debt certificates - - - - -
Bonds 28,297,849 - 225,079 - 28,522,929
Lending to customers - 166,201,206 - - 166,201,206
Financial derivatives 37,885,017 - - - 37,885,017
Other assets - - - 4,692 4,692
Total Assets 66,182,866 183,097,376 225,079 4,692 249,510,013
 
Liabilities
Debt incurred by issuing securities 161,719,935 39,683,582 - - 201,403,517
Collateral received in relation to financial derivatives - 35,800,968 - - 35,800,968
Financial derivatives 392,999 - - - 392,999
Deferred taxes - - - 234,604 234,604
Taxes payable - - - - -
Subordinated dept - 2,434,246 - - 2,434,246
Other liabilities - - - 305,434 305,434
Total Liabilities 162,112,933 77,918,795 - 540,038 240,571,767
 
Total Equity - - - 8,938,246 8,938,246
 
Total Liabilities and Equity 162,112,933 77,918,795 - 9,478,284 249,510,013

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


Note 14 Financial Instruments at Fair Value

Methods in order to determine 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

NOK 1 000 Level 1 Level 2 Level 3 Total
 
Bonds and bills 30,189,424 18,778,651 - 48,968,075
Financial Derivatives - 27,278,826 - 27,278,826
Total Assets 30,189,424 46,057,477 - 76,246,901
 
Bonds - 178,880,889 - 178,880,889
Financial Derivatives - 1,415,786 - 1,415,786
Total Liabilities - 180,296,675 - 180,296,675

The following table presents the company

NOK 1 000 Level 1 Level 2 Level 3 Total
 
Bonds and bills 22,097,884 6,199,965 - 28,297,849
Financial Derivatives - 37,885,017 - 37,885,017
Total Assets 22,097,884 44,084,982 - 66,182,866
 
Bonds - 161,719,935 - 161,719,935
Financial Derivatives - 392,999 - 392,999
Total Liabilities - 162,112,933 - 162,112,933

Note 15 Bonds classified as Hold to Maturity

As of 30.09.2016

Bonds classified as Book value 01.01.2016 Investments Matured Amortizing Exchange rate effects Amortized cost 30.09.2016
 
Hold to maturity 224,605 - -150,000 181 - 74,786
Total certificates and bonds 224,605 - -150,000 181 - 74,786

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 74,786 75,175 388
Total certificates and bonds 74,786 75,175 388

Note 16 Other Liabilities

NOK 1 000 30.09.2016 30.09.2015 2015
 
Employees tax deductions and other deductions 597 479 1,478
Employers national insurance contribution 210 202 462
Accrued holiday allowance 704 699 1,015
Commission payable to shareholder banks 95,986 127,554 117,921
Deposits* 1,520 13,566 12,977
Pension liabilities 13,073 19,185 12,360
Other accrued costs 5,218 143,748 9,902
Total 117,308 305,434 156,116

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    


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 30.09.2016).

NOK 1 000 30.09.2016 30.09.2015 2015
 
Covered bonds 220,025,655 199,137,473 217,752,078
Repurchased bonds -4,127,576 -4,265,659 -5,155,728
Derivatives -25,672,251 -37,133,385 -39,848,930
Total covered bonds 190,225,827 157,738,429 172,747,420
Lending to customers 172,845,082 165,829,470 168,792,683
Norwegian gov't short term debt 1,023,873 0 7,210,022
Other substitute assets (see cover pool ) 32,782,891 9,638,149 14,664,356
Total cover pool 206,651,845 175,467,619 190,667,061
Asset coverage 108,6 % 111,2 % 110,4 %

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 requirement of 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 30.09.2016 30.09.2015 2015
 
Share capital 6,330,548 5,510,548 5,710,548
Premium share fund 3,167,922 2,757,922 2,857,922
Other equity capital 374,328 302,039 1,169,402
Common equity 9,872,798 8,570,509 9,737,872
Intangible assets -1,510 -2,275 -1,880
Declared share dividend - - -105,074
100% deduction of expected losses exceeding loss provisions IRB (CRD IV) -312,674 -316,059 -326,724
Prudent valuation adjustment (AVA) -77,738 -66,801 -83,752
Core equity capital 9,480,876 8,185,374 9,220,442
Hybrid bond 1,080,000 830,000 830,000
Tier 1 equity capital 10,560,876 9,015,374 10,050,442
Supplementary capital (Tier 2) 1,600,000 1,600,000 1,600,000
Total capital 12,160,876 10,615,374 11,650,442
Minimum requirements for capital. NOK 1 000 30.09.2016 30.09.2015 2015
 
Credit risk 3,184,869 3,123,558 3,122,194
Market risk - - -
Operational risk 52,871 41,779 41,779
Depreciation on groups of loans - - -
CVA Risk 107,396 126,289 165,228
Difference in capital requirement resulting from transitional floor 2,576,856 2,461,538 2,463,358
Minimum requirement for capital 5,921,992 5,753,164 5,792,559

Capital coverage

30.09.2016 30.09.2015 2015
 
Risk-weighted assets incl. transitional floor 74,024,894 72,313,358 72,406,991
Capital coverage (%) 16,43 % 14,76 % 16,09 %
Tier 1 capital coverage (%) 14,27 % 12,54 % 13,88 %
Core Tier 1 capital coverage (%) 12,81 % 11,38 % 12,73 %
Leverage ratio (%) 4,25 % 3,43 % 3,54 %

Note 19 Related parties

The Company has 173 329 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 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.


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 30.09.2016 this collateral amounted to NOK 25 331 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 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 30.09.2016