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 01.01.2017 - 30.06.2017.  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 2016.  The principles adressed below should be seen in connection with the accounting principles as they were presented in the annual accounts for 2016. These financial accounts have been approved by the Board of Directors of SpareBank 1 Boligkreditt on 24.10.2017

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 2017 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 2016 Note 3 explains in more detail the use of critical estimates and judgements when applying the accounting policies                 

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 2016.    


Note 2 Net Interest Income

NOK 1 000 30.09.2017 30.09.2016 2016
 
Interest income      
Interest income and similar income from loans to and balances with credit institutions 353,979 378,986 526,792
Interest income and similar income from loans to and balances with customers 3,439,824 3,405,652 4,511,245
Interest income treasury bills -6,365 18,684 7,877
Commission expense (payable to shareholder banks) * -1,126,716 -977,674 -1,247,952
Total interest income 2,660,722 2,825,648 3,797,962
 
Interest expense      
Interest expense and similar expenses to credit institutions -17,030 8,075 12,258
Interest expense and similar expenses on issued bonds 2,306,110 2,416,106 3,265,299
Interest expense and similar expenses on issued certificates 8,653 5,565 9,107
Interest expense and similar expenses on Tier 1 capital ** - 32,178 45,227
Interest expense and similar expenses on Tier 2 capital 39,204 40,308 54,001
Other interest expenses 6,068 1,020 1,073
Total interest expense 2,343,004 2,503,250 3,386,965
 
Net interest income 317,718 322,398 410,997
 

 

* 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. 

** The reclassification on Tier 1 capital, Hybrid capital to equity, occurred at 31.12.2016 so that the interest will first be recognized in other equity as of 01.01.2017

 


Note 3 Net Gains from Financial Instruments

NOK 1 000 30.09.2017 30.09.2016 2016
 
Net gains (losses) from financial liabilities (1) -3,655,610 -3,557,619 -3,274,659
Net gains (losses) from financial derivatives. hedging liabilities. at fair value. hedging instrument (1.3) 3,357,169 3,980,663 3,641,152
Net gains (losses) from financial assets (2) 101,029 -601,426 -665,916
Net gains (losses) from financial derivatives. hedging assets. at fair value. hedging instrument (2.3) 46,663 16,031 77,376
Net gains (losses) due to changes in basisswapspreads (4) -326,201 -96,693 -299,947
Net gains (losses) -476,950 -259,043 -521,993
 

 

(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 differences due to the the amortization of issuance costs and when the 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. 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. 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.   Such investments do not have a corresponding value change in the financial derivatives hedging the assets (and are also not included in the liabilities in line 1 in the table above as this contains only the Company’s issued debt securities).

(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 utilizes 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 expressed in bps per annum.  The change in this cost 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 Renumeration

NOK 1 000 30.09.2017 30.09.2016 2016
 
Salary 7,341 7,666 9,903
Salaries reinvoiced to SpareBank1 N -2,107 -2,311 -2,691
Pension expenses 1,924 1,631 1,956
Social insurance fees 1,633 1,198 1,699
Other personnel expenses 144 119 541
Total salary expenses 8,935 8,303 11,409
 
Average number of full time equivalents (FTEs) 8 8 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 Other Operating Expenses

NOK 1 000 30.09.2017 30.09.2016 2016
 
IT and IT operations 6,948 7,118 9,295
Purchased services other than IT 6,655 7,642 11,471
Other Operating Expenses 1,347 1,106 1,796
Depreciation on fixed assets and other intangible assets 761 1,013 1,367
Total 15,710 16,879 23,929
 

Note 6 Other Assets

NOK 1 000 30.09.2017 30.09.2016 2016
 
Intangible assets 698 1,510 1,245
Account receivables from SpareBank 1 Næringskreditt AS 294 753 299
Total 992 2,262 1,543
 

Note 7 Lending to Customers

NOK 1 000 30.09.2017 30.09.2016 2016
 
Revolving loans - retail market 50,270,071 53,822,598 53,353,004
Amortising loans - retail market 125,670,065 119,376,324 120,969,630
Accrued interest 160,714 137,449 148,277
Total loans before specified and unspecified loss provisions 176,100,850 173,336,371 174,470,911
Specified loan loss provisions   - -
Unspecified loan loss provisions 7,708 7,708 7,708
Total net loans and claims with customers 176,093,142 173,328,663 174,463,203
 
Liability      
Unused balances under customer revolving credit lines (flexible loans) 12,850,826 13,731,753 13,593,736
Total 12,850,826 13,731,753 13,593,736
 
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 %
 
 

Changes to loan loss provisions

NOK 1 000 30.09.2017 30.09.2016 2016
 
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 8 Share Capital and Shareholder Information

List of shareholders as of 30.09.2017

  No of Shares in per cent Share of votes
 
SpareBank 1 Østlandet 13 107 545 20,26 % 20,26 %
SpareBank 1 SMN 12 349 152 19,09 % 19,09 %
SpareBank 1 Nord-Norge 9 452 201 14,61 % 14,61 %
SpareBank 1 SR-Bank ASA 8 972 206 13,87 % 13,87 %
BN Bank ASA 3 904 571 6,03 % 6,03 %
SpareBank 1 BV 2 990 735 4,62 % 4,62 %
SpareBank 1 Østfold Akershus 2 879 967 4,45 % 4,45 %
Sparebanken Telemark 2 728 584 4,22 % 4,22 %
SpareBank 1 Ringerike Hadeland 2 374 127 3,67 % 3,67 %
SpareBank 1 Nordvest 1 421 523 2,20 % 2,20 %
SpareBank 1 Modum 941 527 1,46 % 1,46 %
SpareBank 1 Nøtterøy Tønsberg 904 606 1,40 % 1,40 %
SpareBank 1 Søre Sunnmøre 841 836 1,30 % 1,30 %
SpareBank 1 Hallingdal Valdres 775 375 1,20 % 1,20 %
SpareBank 1 Gudbrandsdal 599 994 0,93 % 0,93 %
SpareBank 1 Lom og Skjåk 461 533 0,71 % 0,71 %
Total 64 705 482 100 % 100 %
 

 

The share capital consists of 64 705 482 shares with a nominal value of NOK 100

 


Note 9 Liabilities incurred by issuing Debt Securities

NOK 1 000       Nominal value* 30.09.2017 Nominal value* 30.09.2016 Nominal value 2016
 
Short term notes. unsecured       765,000 950,000 950,000
Repurchased short term notes. unsecured       -192,000 0 0
Senior unsecured bonds       3,556,000 3,631,000 3,481,000
Repurchased senior unsecured bonds       -484,000 -232,000 -232,000
Covered bonds       189,325,703 193,760,232 185,292,077
Repurchased Covered bonds       -2,357,875 -3,889,085 -1,951,550
Total debt incurred by issuing securities       190,612,828 194,220,147 187,539,527
 

 

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

 

NOK 1 000       Book value 30.09.2017 Book value 30.09.2016 Book value 2016
 
Short term notes. unsecured       764,988 949,959 949,966
Repurchased short term notes. unsecured       -192,097 0 0
Senior unsecured bonds       3,556,289 3,630,568 3,480,574
Repurchased senior unsecured bonds       -484,220 -231,291 -231,456
Covered bonds       209,292,549 218,297,071 209,376,266
Repurchased covered bonds       -2,514,242 -4,102,595 -2,136,734
Activated costs incurred by issuing debt       -166,568 -175,849 -163,181
Accrued interest       1,269,441 1,715,578 1,781,147
Total debt incurred by issuing securities       211,526,141 220,083,440 213,056,583
 

 

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 30.09.2017 30.09.2016 2016
 
2016 - 500,000 0
2017 535,000 2,668,000 2,518,000
2018 1,554,000 300,000 800,000
2019 1,556,000 881,000 881,000
Total 3,645,000 4,349,000 4,199,000
 

Covered bonds

Due in 30.09.2017 30.09.2016 2016
 
2016 - 10,252,000 -
2017 1,824,500 19,480,500 19,449,500
2018 34,841,250 35,754,250 35,754,250
2019 27,554,400 27,530,484 27,535,470
2020 24,963,500 24,958,500 24,958,500
2021 28,815,560 28,458,162 28,770,128
2022 33,403,200 18,698,750 21,148,750
2023 9,410,500 9,211,200 9,252,750
2024 11,013,218 1,503,651 1,517,529
2025 1,010,000 1,010,000 1,010,000
2026 12,185,000 11,255,000 12,185,000
2027 663,900 475,850 475,850
2028 1,282,800 1,282,800 1,282,800
Total 186,967,828 189,871,147 183,340,527
 

 

* 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       30.09.2017 30.09.2016 2016
 
NOK       63,990,855 59,885,435 62,584,741
EUR       129,423,654 131,672,207 120,282,131
USD       17,843,744 28,259,485 29,922,726
SEK       267,888 266,313 266,985
Total       211,526,141 220,083,440 213,056,583
 

Note 10 Subordinated Debt

NOK 1000 ISIN Interest rate Issued year Call option Nominal amount 30.09.2017 30.09.2016 2016
 
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
Accrued interest           3,253 3,552 3,778
* Hybrid (Tier 1 capital instrument)           0 1,080,909 0
Book value           1,603,253 2,684,461 1,603,778
 

 

*All hybrid instruments have been reclassified to equity from 31.12.2016. This is according to the definition of a financial liability under IAS 32.

 


Note 11 Financial Derivatives

NOK 1 000 30.09.2017 30.09.2016 2016
 
Interest rate derivative contracts      
Interest rate swaps      
Nominal amount 74,490,504 77,041,291 69,479,995
Asset 3,704,718 5,113,523 4,346,925
Liability -563,060 -521,729 -667,779
Currency derivative contracts      
Currency swaps      
Nominal amount 134,464,794 146,579,003 138,286,431
Asset 17,932,827 21,763,245 22,604,660
Liability -541,034 -894,056 -1,113,441
Total financial derivative contracts      
Nominal amount 208,955,298 223,620,294 207,766,425
Asset 21,637,545 26,876,768 26,951,585
Liability -1,104,094 -1,415,786 -1,781,221
All derivative contracts exist for the purpose of hedging changes in interest rates and currency exchange rates.      
* Change due to basis swap spread adjustment Liability Asset Asset
Asset/Liability -1,104,094 26,876,768 26,951,585
Net gain (loss) on valuation adjustment of basisswap spreads -127,398 402,058 198,803
Net asset/liability derivatives -1,231,492 27,278,826 27,150,388
 

 

Basis swaps are currency swaps and are entered into at a certain cost (spread) between SpareBank 1 Boligkreditt and counterparties (banks) that have signed an ISDA and CSA 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.  All swaps are employed for hedging purposes.

 


Note 12 Classification of Financial Instruments

NOK 1 000 Financial instruments accounted for fair value* Financial assets and debt accounted for at amortised cost Financial assets held to maturity Non-financial assets and liabilities 30.09.2017
 
Assets          
Deposits at and receivables from financial institutions - 4,200,397 - - 4,200,397
Certificates and bonds 41,638,986 - - - 41,638,986
Lending to customers - 176,093,142 - - 176,093,142
Financial derivatives 21,637,545 - - - 21,637,545
Defered tax asset - - - 9,299 9,299
Other assets - - - 992 992
Total Assets 63,276,531 180,293,539 0 10,291 243,580,361
 
Liabilities          
Debt incurred by issuing securities 166,656,214 44,869,927 - - 211,526,141
Collateral received in relation to financial derivatives - 17,848,036 - - 17,848,036
Financial derivatives 1,231,492 - - - 1,231,492
Deferred taxes - - - 208,816 208,816
Taxes payable - - - - -
Subordinated dept - 1,603,253 - - 1,603,253
Other liabilities - - - 126,173 126,173
Total Liabilities 167,887,706 64,321,216 - 334,989 232,543,911
 
Total Equity - 1,080,000 - 9,956,449 11,036,449
 
Total Liabilities and Equity 167,887,706 65,401,216 - 10,291,438 243,580,361
 

 

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

 

NOK 1 000 Financial instruments accounted for 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 - 10,261,328 - - 10,261,328
Certificates and bonds 48,968,169 - 74,730 - 49,042,899
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

 


Note 13 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 is at fair value 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 is at fair value 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 25,574,356 16,064,630 - 41,638,986
Financial Derivatives - 21,637,545 - 21,637,545
Total Assets 25,574,356 37,702,175 - 63,276,531
 
Bonds - 166,656,214 - 166,656,214
Financial Derivatives - 1,231,492 - 1,231,492
Total Liabilities - 167,887,706 - 167,887,706
 

The following table presents the company

NOK 1 000 Level 1 Level 2 Level 3 Total
 
Bonds and bills 30,189,424 18,778,745 - 48,968,169
Financial Derivatives - 27,278,826 - 27,278,826
Total Assets 30,189,424 46,057,571 - 76,246,995
 
Bonds - 178,880,889 - 178,880,889
Financial Derivatives - 1,415,786 - 1,415,786
Total Liabilities - 180,296,675 - 180,296,675
 

Note 14 Other Liabilities

NOK 1 000 30.09.2017 30.09.2016 2016
 
Employees tax deductions and other deductions 895 597 1,470
Employers national insurance contribution 349 210 476
Accrued holiday allowance 720 704 1,011
Commission payable to shareholder banks 147,624 95,986 92,506
Deposits* 3,713 1,520 1,010
Pension liabilities 14,874 13,073 14,124
Other accrued costs -42,003 5,218 7,267
Total 126,172 117,308 117,865
 

 

The Company does not have an overdraft facility or a revolving credit facility as of 30.09.2017
* Deposits represents temporary balances paid in by customers in excess of the original loan amount

 


Note 15 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 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 (there have been no occurrences of any defaults starting with the commencement of operations through 30.09.2017).

NOK 1 000 30.09.2017 30.09.2016 2016
 
Covered Bonds 210,585,779 220,025,655 211,161,257
Repurchased Bonds -2,549,783 -4,127,576 -2,155,498
Derivatives -20,710,258 -25,672,251 -25,321,068
Total Covered Bonds 187,325,737 190,225,827 183,684,691
Lending to customers 175,509,697 172,845,082 173,757,431
Lending to the public sector (gov. bonds/certificates or gov. guaranteed debt) 1,708,243 4,270,028 0
Liquid assets (substitute assets) 24,477,273 29,536,736 26,181,743
Total Cover Pool 201,695,213 206,651,845 199,939,174
Asset-coverage 107.7 % 108.6 % 108.8 %
 
Liquidity Coverage Ratio (LCR) 30.09.2017 30.09.2016 2016
 
Liquid assets 1,556,781 14,233,426 6,907,156
Cash outflow next 30 days 1,545,125 387,279 430,345
LCR ratio 100.8 % 3675 % 1605 %
 
Net Stable Funding Ratio (NSFR) 30.09.2017 30.09.2016 2016
 
Available amount of stable funding 186,112,783 183,808,893 179,903,405
Required amount of stable funding 180,693,416 178,416,795 178,901,734
NSFR ratio 103.0 % 103.0 % 100.6 %
 

Note 16 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 second 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 until the year 2018. 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. In the following years until the end of 2017, the transitional rules will 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, which is implemented in Norway. The requirement of 15.0% total capital in effect from July 1, 2016 includes a 11.5% Core Tier 1 capital, including a 1.5% countercyclical buffer, and 3.5% other capital. From 31.12.2017 the countercyclical buffer will increase to 2.0%.

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 30.09.2017 30.09.2016 2016
 
Share capital 6,470,548 6,330,548 6,330,548
Premium share fund 3,237,922 3,167,922 3,167,922
Other equity capital 247,980 374,328 473,786
Common equity 9,956,450 9,872,798 9,972,256
Intangible assets -698 -1,510 -1,245
Declared share dividend -113,950 - -113,950
100% deduction of expected losses exceeding loss provisions IRB (CRD IV) -323,288 -312,674 -322,613
Prudent valuation adjustment (AVA) -64,508 -77,738 -71,438
Core equity capital 9,454,006 9,480,876 9,463,010
Hybrid bond 1,080,000 1,080,000 1,080,000
Tier 1 equity capital 10,534,006 10,560,876 10,543,010
Supplementary capital (Tier 2) 1,600,000 1,600,000 1,600,000
Total capital 12,134,006 12,160,876 12,143,010
 
Minimum requirements for capital. NOK 1 000 30.09.2017 30.09.2016 2016
 
Credit risk 3,237,540 3,184,869 3,173,049
Market risk - - -
Operational risk 58,661 52,871 52,871
Depreciation on groups of loans - - -
CVA Risk 227,053 107,396 109,651
Difference in capital requirement resulting from transitional floor 2,401,126 2,576,856 2,545,697
Minimum requirement for capital 5,924,380 5,921,992 5,881,268
 

Capital coverage

  30.09.2017 30.09.2016 2016
 
Risk-weighted assets incl. transitional floor 77,287,638 74,024,894 73,515,848
Capital coverage (%) 16.39 % 16.43 % 16.52 %
Tier 1 capital coverage (%) 14.22 % 14.27 % 14.34 %
Core Tier 1 capital coverage (%) 12.77 % 12.81 % 12.87 %
Leverage ratio (%) 4.41 % 4.25 % 4.38 %
 

Note 17 Related parties

The Company has 176 093 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 18 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 30.09.2017 this collateral amounted to NOK 17 848 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 19 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 30.09.2017