Notes to accounts
Note 1 Accounting Principles
1.1 Basis for preparation
SpareBank1 Boligkreditt AS quarterly accounts have been prepared in accordance with the International Financial Standards (IFRS). The accounts have been produced in accordance with IAS 34 reporting for a partial year. The Company’s accounting principles and calculation methods have not materially changed since the annual accounts for 2018. IFRS 16- Leases have been adopted from 1 January 2019.This standard do not have any significant impacts for SPB1 Boligkreditt AS.
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.
The interim financial statements are not audited.
1.2 Segments
The Company has only one segment, which is the mortage lending to reail custoomers. The segment consists of lending to private individuals and all loans have been acquired from the member banks of the SpareBank 1 alliance.
1.3 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 2018.
Note 2 Net Interest Income
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Interest income | |||
| Interest income from. certificates. bonds and deposits | 179,913 | 313,135 | 380,228 |
| Interest income from residential mortgage loans | 4,025,673 | 3,479,456 | 4,715,801 |
| Commission expense (payable to shareholder banks) * | -1,069,935 | -1,148,637 | -1,518,263 |
| Total interest income | 3,135,652 | 2,643,954 | 3,577,766 |
| Interest expense | |||
| Interest expense and similar expenses to credit institutions | -36,728 | -29,812 | -25,036 |
| Interest expense and similar expenses on issued bonds | 2,775,328 | 2,373,346 | 3,211,071 |
| Interest expense and similar expenses on subordinated debt | 35,609 | 38,494 | 50,836 |
| Guarantee Fund ** | 31,500 | 0 | 0 |
| Other interest expenses | 6,534 | 5,704 | 7,757 |
| Total interest expense | 2,812,243 | 2,387,732 | 3,244,627 |
| Net interest income | 323,409 | 256,222 | 333,139 |
* 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.
** From 2019, SPB1 Boligkreditt has been incorporated into the Norwegian Guarantee Fund.
Note 3 Net Gains from Financial Instruments
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Net gains (losses) from financial liabilities (1) | -5,750,645 | -3,156,350 | -4,904,674 |
| Net gains (losses) from financial derivatives. hedging liabilities. at fair value. hedging instrument (1.3) | 5,758,930 | 3,570,410 | 4,849,334 |
| Net gains (losses) from financial assets (2) | -103,155 | -658,411 | -234,796 |
| Net gains (losses) from financial derivatives. hedging assets. at fair value. hedging instrument (2.3) | 4,599 | 64,364 | -3,394 |
| Net gains (losses) | -90,271 | -179,988 | -293,531 |
(1) The Company utilizes hedge accounting as defined in IFRS for issued fixed rate bonds (covered bonds) with derivatives (swaps) which hedges fixed rates to floating and foreign currencies to Norwegian kroner. The hedges are individually tailored to each issued bond and exactly matches the cash flows and duration of the issued bonds. Some liabilities in foreign currency are hedged with natural hedges (corresponding assets in the same currency and will cause the valuation change of the liabilities to be different to the valuation changes in the derivatives hedging the liabilities (there will also be valuation 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 othercurrencies than Norwegian kroner are hedged using swaps. The latter are valued according to interest rate and foreign exchange rates and are alsovalued 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.
Note 4 Salaries and Remuneration
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Salary | 7,318 | 7,974 | 10,201 |
| Salaries reinvoiced to SpareBank1 Næringskreditt* | -2,092 | -2,183 | -2,870 |
| Pension expenses | 1,673 | 1,735 | 2,055 |
| Social insurance fees | 1,952 | 1,639 | 2,146 |
| Other personnel expenses | 184 | 75 | 234 |
| Total salary expenses | 9,035 | 9,240 | 11,766 |
| Average number of full time equivalents (FTEs) | 7 | 7 | 7 |
* The company’s employees have shared employment between SpareBank 1 Næringskreditt and SpareBank 1 Boligkreditt. All remuneration is effectuated through SpareBank 1 Boligkreditt and a portion is reinvoiced to SpareBank 1 Næringskreditt. 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 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| IT and IT operations | 8,848 | 7,104 | 9,565 |
| Purchased services other than IT | 7,065 | 5,581 | 8,310 |
| Other Operating Expenses | 1,185 | 1,183 | 1,987 |
| Depreciation on fixed assets and other intangible assets | 246 | 475 | 628 |
| Total | 17,344 | 14,344 | 20,490 |
Note 6 Other Assets
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Intangible assets | 461 | 860 | 707 |
| Account receivables from SpareBank 1 Næringskreditt AS | 332 | 647 | 1,043 |
| Other | 198 | 0 | 0 |
| Total | 991 | 1,507 | 1,750 |
Note 7 Residential mortage loans
Lending to customers are residential mortgages only. The mortgages generally have a low loan-to-value and losses have been very low. The total amount of lending to customers at the end of 30.09.2019 were NOK 190 billion. All mortgages carry a variable interest rate.
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Revolving loans - retail market | 43,301,662 | 47,252,001 | 45,484,285 |
| Amortising loans - retail market | 146,266,990 | 136,400,946 | 138,418,290 |
| Accrued interest | 205,186 | 170,448 | 183,912 |
| Total loans before specified and unspecified loss provisions | 189,773,838 | 183,823,395 | 184,086,488 |
| Impairments on groups of loans | |||
| Expected credit loss. stage 1 | 1,030 | 3,762 | 3,905 |
| Expected credit loss. stage 2. no objective proof of loss | 9,587 | 8,270 | 8,665 |
| Expected credit loss. stage 3. objective proof of loss | 0 | 0 | 0 |
| Total net loans and claims with customers | 189,763,221 | 183,811,362 | 184,073,918 |
| Liability | |||
| Unused balances under customer revolving credit lines (flexible loans) | 12,129,027 | 12,600,771 | 12,304,082 |
| Total | 12,129,027 | 12,600,771 | 12,304,082 |
| 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.
Note 8 Share Capital and Shareholder Information
| List of shareholders as of 30.09.2019 | No of Shares | in per cent | Share of votes | ||||
|---|---|---|---|---|---|---|---|
| SpareBank 1 Østlandet | 16,446,741 | 21.61 % | 21.61 % | ||||
| SpareBank 1 SMN | 15,748,727 | 20.69 % | 20.69 % | ||||
| SpareBank 1 Nord-Norge | 13,558,833 | 17.82 % | 17.82 % | ||||
| BN Bank ASA | 4,973,224 | 6.53 % | 6.53 % | ||||
| SpareBank 1 BV | 4,895,107 | 6.43 % | 6.43 % | ||||
| SpareBank 1 SR-Bank ASA | 3,663,342 | 4.81 % | 4.81 % | ||||
| Sparebanken Telemark | 3,498,261 | 4.60 % | 4.60 % | ||||
| SpareBank 1 Ringerike Hadeland | 3.420.431 | 4.49 % | 4.49 % | ||||
| SpareBank 1 Østfold Akershus | 3,318,023 | 4.36 % | 4.36 % | ||||
| SpareBank 1 Nordvest | 1,659,011 | 2.18 % | 2.18 % | ||||
| SpareBank 1 Modum | 1,454,195 | 1.91 % | 1.91 % | ||||
| SpareBank 1 Hallingdal Valdres | 983,118 | 1.29 % | 1.29 % | ||||
| SpareBank 1 Søre Sunnmøre | 944,202 | 1.24 % | 1.24 % | ||||
| SpareBank 1 Gudbrandsdal | 931,914 | 1.22 % | 1.22 % | ||||
| SpareBank 1 Lom og Skjåk | 610,353 | 0.80 % | 0.80 % | ||||
| Total | 76,105,482 | 100 % | 100 % | ||||
The share capital consists of 76 105 482 shares with a nominal value of NOK 100
Hybrid capital
| NOK 1000 | ISIN | Interest rate | Issued year | Call option | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|---|---|---|---|
| Perpetual | |||||||
| Hybrid (Tier 1 capital instrument) | NO0010713746 | 3M Nibor + 310 bp | 2014 | 09.05.2019 | - | 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 | 100,000 |
| Hybrid (Tier 1 capital instrument) | NO0010850621 | 3M Nibor + 340 bp | 2019 | 30.04.2024 | 350,000 | - | - |
| Book value | 1,180,000 | 1,180,000 | 1,180,000 | ||||
Note 9 Liabilities incurred by issuing Securities
| NOK 1 000 | Nominal value* 30.09.2019 | Nominal value* 30.09.2018 | Nominal value* 2018 | |||
|---|---|---|---|---|---|---|
| Senior unsecured bonds | - | 1,388,000 | 1,047,000 | |||
| Repurchased senior unsecured bonds | - | - | - | |||
| Covered bonds | 197,703,292 | 201,170,506 | 188,169,679 | |||
| Repurchased Covered bonds | - | - | - | |||
| Total debt incurred by issuing securities | 197,703,292 | 202,558,506 | 189,216,679 | |||
* Nominal value is incurred debt at exchange rates (EUR/NOK and USD/NOK) at the time of issuance
| NOK 1 000 | Book value 30.09.2019 | Book value 30.09.2018 | Book value 2018 | |||
|---|---|---|---|---|---|---|
| Senior unsecured bonds | - | 1,387,958 | 1,046,990 | |||
| Repurchased senior unsecured bonds | - | - | - | |||
| Covered bonds | 219,323,073 | 215,495,641 | 209,973,603 | |||
| Repurchased covered bonds | - | - | - | |||
| Activated costs incurred by issuing debt | -194,464 | -177,133 | -165,808 | |||
| Accrued interest | 1,092,195 | 1,108,113 | 1,496,260 | |||
| Total debt incurred by issuing securities | 220,220,804 | 217,814,578 | 212,351,045 | |||
Liabilities categorized by debt instrument and year of maturity (nominal value*, net of repurchased bonds) NOK 1,000:
Senior Unsecured Bonds and notes
| Due in | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| 2018 | - | 91,000 | 1,047,000 |
| 2019 | - | 1,297,000 | - |
| Total | - | 1,388,000 | 1,047,000 |
Covered bonds
| Due in | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| 2018 | - | 13,969,250 | - |
| 2019 | 6,030,414 | 27,258,444 | 24,954,124 |
| 2020 | 22,462,500 | 24,963,500 | 24,963,500 |
| 2021 | 28,891,117 | 28,825,266 | 28,894,098 |
| 2022 | 38,749,200 | 38,749,200 | 38,749,200 |
| 2023 | 30,373,550 | 30,256,700 | 30,378,725 |
| 2024 | 22,862,717 | 11,086,348 | 13,916,174 |
| 2025 | 10,648,750 | 10,648,750 | 10,648,750 |
| 2026 | 21,940,000 | 12,185,000 | 12,185,000 |
| 2027 | 674,394 | 665,248 | 674,808 |
| 2028 | 2,562,800 | 2,562,800 | 2,562,800 |
| 2029 | 12,265,350 | - | - |
| 2038 | 242,500 | - | 242,500 |
| Total | 197,703,292 | 201,170,506 | 188,169,679 |
| Total | 197,703,292 | 202,558,506 | 189,216,679 |
* Nominal value is incurred debt at exchange rates (EUR/NOK. USD/NOK. SEK/NOK and GBP/NOK) at the time of issuance
Debt incurred by currency (book values at the end of the period)
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 | |||
|---|---|---|---|---|---|---|
| NOK | 60,323,691 | 62,440,662 | 62,711,262 | |||
| EUR | 141,547,805 | 136,993,834 | 130,285,193 | |||
| USD | 9,601,507 | 10,067,640 | 10,707,438 | |||
| GBP | 8,499,140 | 8,063,438 | 8,382,733 | |||
| SEK | 248,662 | 249,004 | 264,420 | |||
| Total | 220,220,804 | 217,814,578 | 212,351,045 | |||
Note 10 Subordinated Debt
| NOK 1000 | ISIN | Interest rate | Issued year | Call option from | Maturity | Nominal amount | 30.06.2019 | 30.06.2018 | 2018 |
|---|---|---|---|---|---|---|---|---|---|
| With maturity | |||||||||
| Subordinated debt | NO0010704109 | 3M Nibor + 225 bp | 2014 | 07.03.2019 | 07.03.2024 | 475,000 | - | 475,000 | 475,000 |
| Subordinated debt | NO0010826696 | 3M Nibor + 153 bp | 2018 | 22.06.2023 | 22.06.2028 | 250,000 | 250,000 | 250,000 | 250.000 |
| Subordinated debt | NO0010833908 | 3M Nibor + 180 bp | 2018 | 08.10.2025 | 08.10.2030 | 400,000 | 400,000 | 400,000 | 400.000 |
| Subordinated debt | NO0010835408 | 3M Nibor + 167 bp | 2018 | 02.11.2023 | 02.11.2028 | 475,000 | 475,000 | 475,000 | 475,000 |
| Subordinated debt | NO0010842222 | 3M Nibor + 192 bp | 2019 | 24.01.2024 | 24.01.2029 | 300,000 | 300,000 | - | - |
| Accrued interest | 7,972 | 3,108 | 6,160 | ||||||
| Book value | 1,432,972 | 1,603,108 | 1,606,160 | ||||||
The issued bonds listed in the table aboww have status as Tier 2 capital instruments in the Company's capital coverage ratio.
Note 11 Financial Derivatives
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Interest rate derivative contracts | |||
| Interest rate swaps | |||
| Nominal amount | 60,665,104 | 64,380,659 | 68,401,281 |
| Asset | 2,547,232 | 2,496,164 | 2,918,190 |
| Liability | -357,568 | -485,838 | -514,399 |
| Currency derivative contracts | |||
| Currency swaps | |||
| Nominal amount | 145,503,389 | 145,143,490 | 140,302,215 |
| Asset | 19,839,441 | 13,486,789 | 20,265,604 |
| Liability | - | -667,050 | -56,996 |
| Total financial derivative contracts | |||
| Nominal amount | 206,168,494 | 209,524,149 | 208,703,496 |
| Asset | 22,386,673 | 15,982,953 | 23,183,793 |
| Liability | -357,568 | -1,152,888 | -571,395 |
All derivative contracts exist for the purpose of hedging changes in interest rates and currency exchange rates.
| * Change due to basis swap spread adjustment | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Asset/Liability(-) | -357,568 | -1,152,888 | -571,395 |
| Net gain (loss) on valuation adjustment of basisswap spreads | -542,437 | -326,302 | -470,713 |
| Net asset/liability derivatives | -900,005 | -1,479,191 | -1,042,108 |
Basis swaps are currency swaps and are entered into at a certain cost (spread) between SpareBank 1 Boligkreditt and banks which offer such swaps and which have signed an ISDA agreement with the Company. Changes in the cost are valued each quarter across all of the Company’s swaps in accordance with the IFRS rules. An increase in the cost would result in an increase in the value of the basisswaps while a cost decrease would reduce the value of the basis swaps. The effect may be material from quarter to quarter because the Company’s portfolio of swaps is extensive. All basisswap value changes will reverse over time towards the point of termination of the swaps.
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. It will be presented in other comprehensive income.
Note 12 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 | 30.09.2019 |
|---|---|---|---|---|---|
| Assets | |||||
| Lending to and deposits with credit institutions | - | 4,564,258 | - | - | 4,564,258 |
| Certificates and bonds | 35,143,942 | - | - | - | 35,143,942 |
| Residential mortgage loans | - | 189,763,221 | - | - | 189,763,221 |
| Financial derivatives | 22,386,673 | - | - | - | 22,386,673 |
| Defered tax asset | - | - | - | 10,994 | 10,994 |
| Other assets | - | - | - | 991 | 991 |
| Total Assets | 57,530,615 | 194,327,480 | - | 11,986 | 251,870,081 |
| Liabilities | |||||
| Debt incurred by issuing securities | 176,944,884 | 43,275,920 | - | - | 220,220,804 |
| Collateral received in relation to financial derivatives | - | 16,783,630 | - | - | 16,783,630 |
| Repurchase agreement | - | - | - | - | - |
| Financial derivatives | 900,005 | - | - | - | 900,005 |
| Deferred taxes | - | - | - | 21,446 | 21,446 |
| Taxes payable | - | - | - | 52,191 | 52,191 |
| Subordinated dept | - | 1,432,972 | - | - | 1,432,972 |
| Other liabilities | - | - | - | 175,870 | 175,870 |
| Total Liabilities | 177,844,889 | 61,492,522 | - | 249,507 | 239,586,918 |
| Total Equity | - | 1,180,000 | - | 11,103,163 | 12,283,163 |
| Total Liabilities and Equity | 177,844,889 | 62,672,522 | - | 11,352,670 | 251,870,081 |
*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 | 30.09.2018 |
|---|---|---|---|---|---|
| Assets | |||||
| Lending to and deposits with credit institutions | - | 11,411,753 | - | - | 11,411,753 |
| Residential mortage loans | - | 183,811,362 | - | - | 183,811,362 |
| Certificates and bonds | 35,032,317 | - | - | - | 35,032,317 |
| 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 | - | 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
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 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, butwhere prices are indirectly observable for assets or liabilities, but also includes listed prices in not active markets.
Level 3: The valuation is based on factors that are not found in observable markets (non-observable assumptions). If valuations according to Level 1 or Level 2 are not available, valuations are based on not-observable information. The Company has a matter of principle neither assets nor liabilities which are valued at this level.
The following table presents the company’s assets and liabilities at fair value as of 30.09.2019
| NOK 1 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Bonds and bills | 22,551,609 | 12,592,333 | - | 35,143,942 |
| Financial Derivatives | - | 22,386,673 | - | 22,386,673 |
| Total Assets | 22,551,609 | 34,979,006 | - | 57,530,615 |
| Bonds | - | 176,944,884 | - | 176,944,884 |
| Financial Derivatives | - | 900,005 | - | 900,005 |
| Total Liabilities | - | 177,844,889 | - | 177,844,889 |
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 |
Note 14 Other Liabilities
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Employees tax deductions and other deductions | 366 | 499 | 623 |
| Employers national insurance contribution | 383 | 297 | 708 |
| Accrued holiday allowance | 707 | 663 | 946 |
| Commission payable to shareholder banks | 126,512 | 111,668 | 132,512 |
| Deposits* | 1,407 | 188 | 525 |
| Pension liabilities | 11,211 | 15,961 | 10,461 |
| Other accrued costs | 35,284 | 6,067 | 4,988 |
| Total | 175,870 | 135,343 | 150,763 |
The Company does not have an overdraft facility or a revolving credit facility as of 30.06.2019
* 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 difference between this asset coverage test and the amounts in the balance sheet; for the purposes of the test mortgage loans which may have migrated above the 75% loan to value level are adjusted. Only that part of the mortgage loan corresponding to a loan to value up to 75% of the collateral is considered. Market values are used for all substitute collateral in the test. In addition any defaulted loans, i.e. loans in arrears at or beyond 90 days, are excluded from the test..
| NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Total Covered Bonds | 220,415,268 | 216,599,631 | 211,466,729 |
| Residential mortgage loans | 188,707,184 | 182,857,384 | 182,916,170 |
| Lending to the public sector (gov. bonds/certificates or gov. guaranteed debt) | 1,663,449 | 1,876,221 | 2,443,614 |
| Reverse repo/ depo less than 100 days | 1,549,291 | 9,386,748 | 9,337,374 |
| Exposure to credit institutions (covered bonds) | 19,393,961 | 21,758,180 | 7,829,441 |
| Derivatives | 22,029,105 | 14,830,064 | 22,612,398 |
| Total Cover Pool | 233,342,990 | 230,708,598 | 225,138,997 |
| Asset-coverage | 105.9 % | 106.5 % | 106.5 % |
| Liquidity Coverage Ratio (LCR) | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Liquid assets | 11,932,647 | 9,916,420 | 10,054,367 |
| Cash outflow next 30 days | 4,772,533 | 1,254,658 | 1,061,996 |
| LCR ratio | 250.0 % | 790.4 % | 946.7 % |
| Net Stable Funding Ratio (NSFR) | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Available amount of stable funding | 200,358,957 | 198,196,910 | 202,019,676 |
| Required amount of stable funding | 205,559,935 | 190,959,935 | 191,375,955 |
| NSFR ratio | 102.6 % | 103.8 % | 105.6 % |
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.
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 European Union has approved new regulatory requirements, CRD IV, which is implemented in Norway. The requirement of 16.3% total capital for SpareBank 1 Boligkreditt includes:
- Minimum core equity Pillar 1: 4.5 per cent.
- Additional Tier 1 equity capital 1.5 per cent. and additiponal Tier 2 capital 2.0 per cent (can be held as Tier 1 and Tier 2, alternatively as core equity capital)
- Conservation buffer: 2.5 per cent core capital
- Systemic risk buffer: 3 per cent. core equity
- Countercyclical buffer: 2 per cent. core equity (will increase to 2.5 per cent. on 31.12.2019)
The Issuer has an additional Pillar 2 requirement which is 0.8 per cent. core equity capital. The total requirement for the Issuer is therefore to have capital of minimum 16.3 per cent. of risk weighted assets. With a management buffer added, the target for capital coverage is 16.7 per cent. as of year-end 2018.
The Company’s parent banks have committed themselves to keep the Company’s Equity Tier 1 capital at the minimum regulatory level (in the Shareholders Agreement). Primarily this commitment is pro rata according to the ownership stakes in the Company, but it is a joint and several undertaking if one or more ownership banks are unable to comply, up to the maximum of twice the initial pro rata amount.
| Capital. NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Share capital | 7,610,548 | 7,090,548 | 7,190,548 |
| Premium share fund | 3,807,922 | 3,547,922 | 3,597,922 |
| Other equity capital | -471,879 | -125,974 | -385,104 |
| Common equity | 10,946,591 | 10,512,496 | 10,403,366 |
| Intangible assets | -461 | -860 | -707 |
| Declared share dividend | - | - | - |
| 100% deduction of expected losses exceeding loss provisions IRB (CRD IV) | -392,390 | -346,871 | -363,428 |
| Prudent valuation adjustment (AVA) | -21,486 | -33,119 | -15,182 |
| Core equity capital | 10,532,254 | 10,131,646 | 10,024,049 |
| Hybrid bond | 1,180,000 | 1,180,000 | 1,180,000 |
| Tier 1 equity capital | 11,712,254 | 11,311,646 | 11,204,049 |
| Supplementary capital (Tier 2) | 1,425,000 | 1,600,000 | 1,600,000 |
| Total capital | 13,137,254 | 12,911,646 | 12,804,049 |
| Minimum requirements for capital. NOK 1 000 | 30.09.2019 | 30.09.2018 | 2018 |
|---|---|---|---|
| Credit risk | 3,627,350 | 3,316,120 | 3,362,169 |
| Market risk | - | - | - |
| Operational risk | 58,499 | 62,185 | 62,185 |
| Depreciation on groups of loans | - | - | - |
| CVA Risk | 362,097 | 173,229 | 308,572 |
| Difference in capital requirement resulting from transitional floor | 2,249,689 | 2,559,659 | 2,378,276 |
| Minimum requirement for capital (8 per cent of RWA) | 6,297,636 | 6,111,193 | 6,111,202 |
Capital coverage
| 30.09.2019 | 30.09.2018 | 2018 | |
|---|---|---|---|
| Risk-weighted assets incl. transitional floor | 78,720,448 | 76,389,911 | 76,390,017 |
| Capital coverage (requirement w/all buffers. 16.3%) | 16.69 % | 16.90 % | 16.76 % |
| Tier 1 capital coverage (requirement w/all buffers. 14.3%) | 14.88 % | 14.81 % | 14.67 % |
| Core capital coverage (requirement w/all buffers. 12.8%) | 13.38 % | 13.26 % | 13.12 % |
| Leverage ratio (requirement 3%) | 4.87 % | 4.83 % | 4.91 % |
Note 17 Related parties
The Company has 189 763 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 30.09.2019 this collateral amounted to NOK 16 784 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 30.09.2019.