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 01.01.2018 - 30.09.2018. 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 2017.  The principles adressed below should be seen in connection with the accounting principles as they were presented in the annual accounts for 2017.

These financial accounts have been approved by the Board of Directors of SpareBank 1 Boligkreditt on 24.10.2018        

1.2 IFRS 9 Financial Instruments
IFRS 9 Financial Instruments has replaced IAS 39 from January 1 2018. See note 32 IFRS 9 in the annual accounts for 2017, and note 7 and note 8 in the interim financial statements Q3 2018 for more information on the implementation of IFRS 9.                            

1.3 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 segments total results.                             

1.4 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.                         

1.5 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 2017 Note 3 explains in more detail the use of critical estimates and judgements when applying the accounting policies.

1.6 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 2017.


Note 2 Net Interest Income

NOK 1 000 30.09.2018 30.09.2017 2017
 
Interest income
Interest income from. certificates. bonds and deposits 313,135 347,615 453,891
Interest income from residential mortgage loans 3,479,456 3,439,824 4,599,141
Commission expense (payable to shareholder banks) * -1,148,637 -1,126,716 -1,582,762
Total interest income 2,643,954 2,660,722 3,470,270
 
Interest expense
Interest expense and similar expenses to credit institutions -29,812 -8,378 -15,755
Interest expense and similar expenses on issued bonds 2,373,346 2,306,110 3,000,407
Interest expense and similar expenses on subordinated debt 38,494 39,204 51,641
Other interest expenses 5,704 6,068 8,124
Total interest expense 2,387,732 2,343,004 3,044,417
 
Net interest income 256,222 317,718 425,852

* 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 from Financial Instruments

NOK 1 000 30.09.2018 30.09.2017 2017
 
Net gains (losses) from financial liabilities (1) -3,156,350 -3,655,610 -3,819,661
Net gains (losses) from financial derivatives. hedging liabilities. at fair value. hedging instrument (1.3) 3,570,410 3,357,169 3,006,425
Net gains (losses) from financial assets (2) -658,411 101,029 517,587
Net gains (losses) from financial derivatives. hedging assets. at fair value. hedging instrument (2.3) 64,364 46,663 54,560
Net gains (losses) due to changes in basisswapspreads (4) - -326,201 -389,271
Net gains (losses) -179,988 -476,950 -630,361

(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. IFRS 9 allows the company to present the changes in basisswapspreads below other comprehensive income. As of 01.01.2018 it will no longer be presented below the income statement.


Note 4 Salaries and Remuneration

NOK 1 000 30.09.2018 30.09.2017 2017
 
Salary 7,974 7,341 10,486
Salaries reinvoiced to SpareBank1 Næringskreditt* -2,183 -2,107 -2,945
Pension expenses 1,735 1,924 2,002
Social insurance fees 1,639 1,633 2,251
Other personnel expenses 75 144 221
Total salary expenses 9,240 8,935 12,017
 
Average number of full time equivalents (FTEs) 7 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 30.09.2018 30.09.2017 2017
 
IT and IT operations 7,104 6,948 9,143
Purchased services other than IT 5,581 6,655 10,290
Other Operating Expenses 1,183 1,347 1,934
Depreciation on fixed assets and other intangible assets 475 761 1,021
Total 14,344 15,710 22,389

Note 6 Other Assets

NOK 1 000 30.09.2018 30.09.2017 2017
 
Intangible assets * 860 698 438
Account receivables from SpareBank 1 Næringskreditt AS 647 294 750
Total 1,507 992 1,188

Note 7 Lending to Customers

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 30.09.2018 were NOK 183,8 billion. All mortgages carry a variable interest rate.

NOK 1 000 30.09.2018 30.09.2017 2017
 
Revolving loans - retail market 47,252,001 50,270,071 49,192,170
Amortising loans - retail market 136,400,946 125,670,065 128,318,018
Accrued interest 170,448 160,714 172,650
Total loans before specified and unspecified loss provisions 183,823,395 176,100,850 177,682,838
 
-
Individual impairments - 7,708 7,708
Impairments on groups of loans - - -
Expected credit loss. stage 1 3,762 N/A N/A
Expected credit loss. stage 2. no objective proof of loss 8,270 N/A N/A
Expected credit loss. stage 3. objective proof of loss - N/A N/A
Total net loans and claims with customers 183,811,362 176,093,142 177,675,130
 
Liability
Unused balances under customer revolving credit lines (flexible loans) 12,600,771 12,850,826 12,431,823
Total 12,600,771 13,121,002 12,431,823
 
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.

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 32.1 in the annual account 2017.

NOK 1 000 2018
Loans and advances to customers at amortized cost Stage 1 Stage 2 Stage 3 Total
 
Balance sheet on 1 January 2018 3,843 7,960 - 11,803
Transfer to 12 month ECL -9 - - -9
Transfer to lifetime ECL - No objective evidence of loss - 339 - 339
Transfer to lifetime ECL - objective proof of loss - - -
Net remeasurement of loss allowance -9 339 - 329
New financial assets originated or purchased N/A N/A - N/A
Change due to reduced portifolio N/A N/A - N/A
Other movements N/A N/A - N/A
Balance sheet on 30 September 2018 3,834 8,299 - 12,132

Note 8 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 32.1 in the annual account 2017.

NOK 1 000 2018
Loans and advances to customers at amortized cost Stage 1 Stage 2 Stage 3 Total
 
Balance sheet on 1 January 2018 3,843 7,960 - 11,803
Transfer to 12 month ECL N/A N/A - N/A
Transfer to lifetime ECL - No objective evidence of loss N/A N/A - N/A
Transfer to lifetime ECL - objective proof of loss - -
Net remeasurement of loss allowance N/A N/A - N/A
New financial assets originated or purchased N/A N/A - N/A
Change due to reduced portifolio N/A N/A - N/A
Other movements N/A N/A - N/A
Balance sheet on 30 September 2018 3,834 8,299 - 12,132

Note 9 Share Capital and Shareholder Information

List of shareholders as of 30.09.2018

No of Shares in per cent Share of votes
 
SpareBank 1 Østlandet 14,946,509 21.08 % 21.08 %
SpareBank 1 SMN 14,071,552 19.85 % 19.85 %
SpareBank 1 Nord-Norge 11,949,267 16.85 % 16.85 %
SpareBank 1 SR-Bank ASA 5,642,356 7.96 % 7.96 %
BN Bank ASA 4,700,587 6.63 % 6.63 %
SpareBank 1 BV 4,426,390 6.24 % 6.24 %
SpareBank 1 Østfold Akershus 3,215,583 4.54 % 4.54 %
Sparebanken Telemark 3,152,066 4.45 % 4.45 %
SpareBank 1 Ringerike Hadeland 2,949,604 4.16 % 4.16 %
SpareBank 1 Nordvest 1,568,093 2.21 % 2.21 %
SpareBank 1 Modum 1,151,259 1.62 % 1.62 %
SpareBank 1 Søre Sunnmøre 915,051 1.29 % 1.29 %
SpareBank 1 Hallingdal Valdres 873,369 1.23 % 1.23 %
SpareBank 1 Gudbrandsdal 784,046 1.11 % 1.11 %
SpareBank 1 Lom og Skjåk 559,750 0.79 % 0.79 %
Total 70,905,482 100 % 100 %

The share capital consists of 70 905 482 shares with a nominal value of NOK 100

Hybrid capital

NOK 1000 ISIN Interest rate Issued year Call option 30.09.2018 30.09.2017 2017
 
Perpetual
Hybrid (Tier 1 capital instrument) NO0010713746 3M Nibor + 310 bp 2014 09.05.2019 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
Hybrid (Tier 1 capital instrument) NO0010746191 3M Nibor + 360 bp 2015 29.09.2020 180,000 180,000 180,000
Hybrid (Tier 1 capital instrument) NO0010767643 3M Nibor + 360 bp 2016 22.06.2021 250,000 250,000 250,000
Hybrid (Tier 1 capital instrument) NO0010811318 3M Nibor + 310 bp 2017 01.12.2022 100,000 - 100,000
Book value 1,180,000 1,080,000 1,180,000

Note 10 Liabilities incurred by issuing Securities

NOK 1 000 Nominal value* 30.09.2018 Nominal value* 30.09.2017 Nominal value*2017
 
Short term notes. unsecured - 765,000 121,000
Repurchased short term notes. unsecured -192,000
Senior unsecured bonds 1,388,000 3,556,000 2,747,000
Repurchased senior unsecured bonds -484,000
Covered bonds 201,170,506 189,325,703 195,440,860
Repurchased Covered bonds -2,357,875 -679,000
Total debt incurred by issuing securities 202,558,506 190,612,828 197,629,860

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

NOK 1 000 Book value 30.09.2018 Book value 30.09.2017 Book value 2017
 
Short term notes. unsecured - 764,988 120,999
Repurchased short term notes. unsecured - -192,097 -
Senior unsecured bonds 1,387,958 3,556,289 2,747,224
Repurchased senior unsecured bonds - -484,220 -
Covered bonds 215,495,641 209,292,549 220,881,928
Repurchased covered bonds - -2,514,242 -690,258
Activated costs incurred by issuing debt -177,133 -166,568 -165,460
Accrued interest 1,108,113 1,269,441 1,568,549
Total debt incurred by issuing securities 217,814,578 211,526,141 224,462,981

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 30.09.2018 30.09.2017 2017
 
2017 - 535,000 -
2018 91,000 1,554,000 1,312,000
2019 1,297,000 1,556,000 1,556,000
Total 1,388,000 3,645,000 2,868,000

Covered bonds

Due in 30.09.2018 30.09.2017 2017
 
2017 - 1,824,500 -
2018 13,969,250 34,841,250 33,624,750
2019 27,258,444 27,554,400 27,580,116
2020 24,963,500 24,963,500 24,963,500
2021 28,825,266 28,815,560 28,877,278
2022 38,749,200 33,403,200 38,749,200
2023 30,256,700 9,410,500 14,624,800
2024 11,086,348 11,013,218 11,191,944
2025 10,648,750 1,010,000 1,010,000
2026 12,185,000 12,185,000 12,185,000
2027 665,248 663,900 672,472
2028 2,562,800 1,282,800 1,282,800
Total 201,170,506 186,967,828 194,761,860
 
Total 202,558,506 190,612,828 197,629,860

* 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 30.09.2018 30.09.2017 2017
 
NOK 62,440,662 63,990,855 65,008,436
EUR 136,993,834 129,423,654 135,362,359
USD 10,067,640 17,843,744 18,270,303
GBP 8,063,438 0 5,546,052
SEK 249,004 267,888 275,832
Total 217,814,578 211,526,141 224,462,981

Note 11 Subordinated Debt

NOK 1000 ISIN Interest rate Issued year Call option from Maturity Nominal amount 30.09.2018 30.09.2017 2017
 
With maturity
Subordinated debt (Tier 2 capital instrument) NO0010704109 3M Nibor + 225 bp 2014 07.05.2019 07.03.2024 1,350,000 1,350,000 1,600,000 1,600,000
Subordinated debt (Tier 2 capital instrument) NO0010826696 3M Nibor + 153 bp 2018 22.06.2023 22.06.2028 250,000 250,000 0 0
Accrued interest 3,108 3,253 3,356
Book value 1,603,108 1,603,253 1,603,356

Note 12 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 31.12.2017 Financing cash flows Adjustments Other changes 30.09.2018
 
Liabilities
Debt incurred by issuing certificates 122,705 -120,999 - -1,706 0
Debt incurred by issuing bonds 224,340,276 5,296,092 -10,200,932 -1,620,859 217,814,578
Collateral received in relation to financial derivatives 23,628,253 -9,657,823 - -600,196 13,370,235
Financial derivatives 898,292 - 445,064 135,834 1,479,191
Subordinated dept 1,603,356 - - -248 1,603,108
Hybrid capital 1,180,000 - - - 1,180,000
251,772,882 -4,482,729 -9,755,868 -2,087,173 235,447,111

Note 13 Financial Derivatives

NOK 1 000 30.09.2018 30.09.2017 2017
 
Interest rate derivative contracts
Interest rate swaps
Nominal amount 64,380,659 74,490,504 74,269,883
Asset 2,496,164 3,704,718 3,661,041
Liability -485,838 -563,060 -655,346
 
Currency derivative contracts
Currency swaps
Nominal amount 145,143,490 134,464,794 145,676,228
Asset 13,486,789 17,932,827 23,483,084
Liability -667,050 -541,034 -52,478
 
Total financial derivative contracts
Nominal amount 209,524,149 208,955,298 219,946,110
Asset 15,982,953 21,637,545 27,144,125
Liability -1,152,888 -1,104,094 -707,824

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 Liability 2017
 
Asset/Liability -1,152,888 -1,104,094 -707,824
Net gain (loss) on valuation adjustment of basisswap spreads -326,302 -127,398 -190,468
Net asset/liability derivatives -1,479,191 -1,231,492 -898,292

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.

For the market value of derivatives solely related to the covered bonds issued, i.e that hedge the outstanding covered bonds with regards to interest rates or currencies, please see note titled “Asset Coverage Test”. Remaining derivatives (swaps) are used to hedge positions within liquid assets not denominated in NOK and/or at fixed rates.


Note 14 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 30.09.2018
 
Assets
Lending to and deposits with credit institutions - 11,411,753 - - 11,411,753
Lending to customers 35,032,317 - - - 35,032,317
Certificates and bonds - 183,811,362 - - 183,811,362
Financial derivatives 15,982,953 - - - 15,982,953
Defered tax asset - - - 10,055 10,055
Other assets - - - 1,507 1,507
Total Assets 51,015,270 195,223,115 0 11,562 246,249,947
 
Liabilities
Debt incurred by issuing securities 171,644,706 46,169,872 - - 217,814,578
Collateral received in relation to financial derivatives - 13,370,235 - - 13,370,235
Financial derivatives 1,479,191 - - - 1,479,191
Deferred taxes - - - 102,675 102,675
Taxes payable - - - - -
Subordinated dept - 1,603,108 - - 1,603,108
Other liabilities - - - 148,423 148,423
Total Liabilities 173,123,896 61,143,215 - 251,099 234,518,210
 
Total Equity - 1,180,000 - 10,551,737 11,731,737
 
Total Liabilities and Equity 173,123,896 62,323,215 - 10,802,836 246,249,947

*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 30.09.2017
 
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


Note 15 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, or calculated based on market rates for cash flows of assets or liabilities, but could also include 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 30.09.2018

NOK 1 000 Level 1 Level 2 Level 3 Total
 
Bonds and bills 21,280,143 13,752,174 - 35,032,317
Financial Derivatives - 15,982,953 - 15,982,953
Total Assets 21,280,143 29,735,127 - 51,015,270
 
Bonds - 171,644,706 - 171,644,706
Financial Derivatives - 1,479,191 - 1,479,191
Total Liabilities - 173,123,896 - 173,123,896

The following table presents the company’s assets and liabilities at fair value as of 30.09.2017

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

Note 16 Other Liabilities

NOK 1 000 30.09.2018 30.09.2017 2017
 
Employees tax deductions and other deductions 499 895 911
Employers national insurance contribution 297 349 627
Accrued holiday allowance 663 720 1,038
Commission payable to shareholder banks 111,668 147,624 155,832
Deposits* 188 3,713 771
Pension liabilities 15,961 14,874 15,211
Other accrued costs 19,147 -42,003 7,840
Total 148,423 126,172 182,231

The Company does not have an overdraft facility or a revolving credit facility as of 30.09.2018
* 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 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 2017).

According to discussions the Company has had with the Financial Services Authority, the presentation of the table in this note has been modified in the following way from year end 2017 (30.09.2017 is shown on the previous basis):

- The derivatives values, which are fx and/or hedges corresponding to issued covered bonds have been moved to be included in the cover pool. They were previously shown with the covered bonds.
- Repurchased own bonds have been removed from the calculation

NOK 1 000 30.09.2018 30.09.2017 2017
 
Covered Bonds 216,599,631 210,585,779 222,444,844
Repurchased Bonds - -2,549,783 -
Derivatives - -20,710,258 -
Total Covered Bonds 216,599,631 187,325,737 222,444,844
Residential mortgage loans 182,857,384 175,509,697 176,832,108
Lending to the public sector (gov. bonds/certificates or gov. guaranteed debt) 1,876,221 1,708,243 2,432,576
Reverse repo/ depo less than 100 days 9,386,748 - -
Exposure to credit institutions (covered bonds) 21,758,180 24,477,273 30,750,021
Derivatives 14,830,064 - 26,599,558
Total Cover Pool 230,708,598 201,695,213 236,614,263
Asset-coverage 106.5 % 107.7 % 106.4 %
Liquidity Coverage Ratio (LCR) 30.09.2018 30.09.2017 2017
 
Liquid assets 9,916,420 1,556,781 510,729
Cash outflow next 30 days 1,254,658 1,545,125 491,758
LCR ratio 790 % 101 % 104 %
Net Stable Funding Ratio (NSFR) 30.09.2018 30.09.2017 2017
 
Available amount of stable funding 198,196,910 186,112,783 185,243,178
Required amount of stable funding 190,959,935 180,693,416 181,490,902
NSFR ratio 103.8 % 103.0 % 102.1 %

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 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 16.3% total capital in effect from December 31, 2017 includes a 12.8% Core Tier 1 capital (including a 2.0% countercyclical buffer and 0,8% pilar 2 requirment) 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 30.09.2018 30.09.2017 2017
 
Share capital 7,090,548 6,470,548 6,570,548
Premium share fund 3,547,922 3,237,922 3,287,922
Other equity capital -125,974 247,980 233,254
Common equity 10,512,496 9,956,450 10,091,724
Intangible assets -860 -698 -438
Declared share dividend - -113,950 -72,276
100% deduction of expected losses exceeding loss provisions IRB (CRD IV) -346,871 -323,288 -338,144
Prudent valuation adjustment (AVA) -33,119 -64,508 -32,770
Core equity capital 10,131,646 9,454,006 9,648,096
Hybrid bond 1,180,000 1,080,000 1,180,000
Tier 1 equity capital 11,311,646 10,534,006 10,828,096
Supplementary capital (Tier 2) 1,600,000 1,600,000 1,600,000
Total capital 12,911,646 12,134,006 12,428,096
Minimum requirements for capital. NOK 1 000 30.09.2018 30.09.2017 2017
 
Credit risk 3,316,120 3,237,540 3,318,616
Market risk - - -
Operational risk 62,185 58,661 58,661
Depreciation on groups of loans - - -
CVA Risk 173,229 227,053 245,931
Difference in capital requirement resulting from transitional floor 2,559,659 2,401,126 2,337,486
Minimum requirement for capital 6,111,193 5,924,380 5,960,695

Capital coverage

30.09.2018 30.09.2017 2017
 
Risk-weighted assets incl. transitional floor 76,389,911 74,054,758 74,508,686
Capital coverage (%) 16.90 % 16,.39 % 16.68 %
Tier 1 capital coverage (%) 14.81 % 14.22 % 14.53 %
Core Tier 1 capital coverage (%) 13.26 % 12.77 % 12.95 %
Leverage ratio (%) 4.83 % 4.24 % 3.63 %

Note 19 Related parties

The Company has 183 811 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 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 30.09.2018 this collateral amounted to NOK 13 370 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 30.09.2018.