GRAphic DesiGn:
sparebanken sogn og Fjordane / e. natvik prenteverk As, Florø
3 Key figures 4 Directors’ report 6 profit and loss account 7 Balance sheet
8 cash flow statement 9 equity statement 10 notes
30 Auditor’s report
31 Audit committee’s annual report 31 Declaration by the Board of Directors
and ceo
33 information about the company
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Key figures
FiGuRes in noK ‘000s
PROFIT AND LOSS ACCOUNT
2011 2010net interest margin 0,61 % 0,80 %
profit after tax as a % of average total assets 0,26 % 0,42 %
KEY BALANCE SHEET FIGURES
Gross loans to customers 4 907 800 2 604 034
collectively assessed impairment provisions 7 416 3 628
equity 403 597 218 789
total assets 5 170 672 2 773 068
Average total assets 3 766 239 1 906 456
OTHER KEY FIGURES
cost income ratio 24,72 % 19,07 %
impairment charge as a % of total assets 0,08 % 0,05 %
impairment provisions as a % of total assets 0,15 % 0,14 %
Return on equity after tax* 4,10 % 7,18 %
capital adequacy ratio 21,29 % 20,82 %
BALANCE SHEET – YEAR-ON-YEAR GROWTH
% %Growth in total assets 86,46 % 72,77 %
Growth in customer lending 88,47 % 81,31 %
4 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
HIGHLIGHTS
Bustadkreditt sogn og Fjordane As is a wholly-owned subsidiary of sparebanken sogn og Fjordane, the company is based at the Bank's head office in Førde.
in January 2009 sparebanken sogn og Fjordane was licensed by the Financial supervisory Authority of norway to set up a residential mortgage company that would issue covered bonds. the company was formed through reorganising ssF eigedom As. it started normal operations in March 2009, and by the end of 2011 it had issued covered bonds with a face value of noK 4 billion. At the close of 2011 the total cover pool was worth noK 5.16 billion. this is around 29% more than the value of the covered bonds issued. until sparebanken sogn og Fjordane has an international rating equivalent to or better than an A2 from Moody's, the cover pool must be worth at least 11% more than the face value of the covered bonds. the cover pool was made up of residential mortgages worth noK 4.9 billion, as well as bonds and bank deposits with a total value of noK 264 million that are included as substitute assets. subti-tute assets made up 5.1% of the total cover pool. the establishment of Bustadkreditt sogn og Fjordane As was an important part of sparebanken sogn og Fjordane's strategy for securing long-term liquidity.
At the close of 2011, the company had 4,722 residen-tial mortgages worth a total of noK 4,908 million. 31.8% of the loan book is made up of flexible mortgages. A further 14.8% of the loans are interest-only.
the average loan-to-value ratio (weighted by initial value) was 54.7%, and the weighted average remaining term was 14.4 years. the weighted average age of the loans was 2.5 years. the average volum per loan was noK 1.04 million. the company's total loan portfolio grew by noK 2,304 million over the past year.
the geographic distribution of the residential mortgage portfolio split by the customers' address was as follows:
Region Share
Western Norway 75,6 %
Sogn og Fjordane 48,7 %
Førde 14,2 %
eid, Flora, sogndal and stryn 11,0 %
Rest of sogn og Fjordane 23,4 %
Region Share
Hordaland 22,5 %
Bergen 8,9 %
Rest of hordaland 13,7 %
Rogaland, Møre og Romsdal 4,5 %
Eastern Norway 22,2 %
oslo and Akershus 18,3 %
Rest of eastern norway 3,9 %
Central Norway 0,9 %
Southern Norway 0,7 %
Northern Norway 0,3 %
Overseas 0,3 %
Total 100,0 %
PROFIT AND LOSS ACCOUNT
in 2011 the company made an operating profit before loan impairment charges of noK 17.5 million. the net loan impairment charge was noK 3.8 million, which related to collectively assessed impairment provisions. profit for the year after tax was noK 9.9 million.
net interest income was noK 22.9 million in 2011, equivalent to 0.61% of average total assets. this is down from 0.81% of average total assets in 2010, mainly due to increase funding costs. other operating income came to noK 0.3 million. in 2011, operating expenses were noK 5.7 million, equivalent to 24.7% of total operating income. the company has no employees, and buys services from sparebanken sogn og Fjordane and edb ergo Group As. services are bought on market terms.
TRENDS IN NON-PERFORMING LOANS
At the close of 2011, the company had no loans that were more than 90 days in arrears. non- performing loans are monitored carefully.
BALANCE SHEET AND CAPITAL ADEQUACY
total assets have increased in line with the loan portfolio, and at 31 December 2011 they totalled noK 5,171 million. this was an increase of almost noK 2.4 billion over 31 December 2010. the company borrows money through covered bonds. in addition, the company has good long-term credit facilities with sparebanken sogn og Fjordane.
equity at the close of the year was noK 403.6 million after allocation of the profit for the year. in 2011 sparebanken sogn og Fjordane injected noK 175 million of new share capital to ensure that the company was adequately capitalised.
At 31 December 2011 the company had noK 403.1 million of net equity and subordinated debt and a core capital adequacy ratio of 21.3%.
the Board of Directors considers the company's equity to be satisfactory and adequate in relation to its activities and operations.
INTERNASJONAL RATING
in september 2011, Bustadkreditt sogn og Fjordane As's covered bond programme was given a long-term rating of Aaa by the credit rating agency Moody's.
GUARANTEES AND MORTGAGES
the company has not issued any kind of guaran-tees. nor has it issued any collateral, except residential mortgages and the substitute assets in the cover pool. Residential mortgages and substi-tute assets are collateral for the covered bonds.
RISK
in accordance with its licence to operate as a credit institution (norw.: kredittforetak), Bustadkreditt sogn og Fjordane As is subject to laws, regulations and rules that limit the level of risk to which it can be exposed. the Board of Directors and ceo are responsible for establishing risk management procedures, and for ensuring that they are adequate and in compliance with laws and regulations.
Bustadkreditt sogn og Fjordane As is exposed to credit risk, operational risk, liquidity risk and interest rate risk. credit risk is the most significant of these. capital adequacy has been calculated by measuring credit risk using the standardised app- roach and operational risk using the basic ind icator approach. limits have been set on exposure to the various classes of risk. the Board considers it a priority for the company to maintain a low risk exposure.
Credit risk
Bustadkreditt sogn og Fjordane As is exposed to credit risk through residential mortgages, and to counterparty risk through its investments in financial markets.
the loans that it purchases from sparebanken sogn og Fjordane have good collateral. At the time of purchase, the loan must represent no more than 75% of the approved value of the collateral. the values of properties used as collateral for residen-tial mortgage loans are updated quarterly. estima-ted values provided by eiendomsverdi As, used alone or in combination with valuations from surveyors or estate agents, determine the approved values for properties.
the first tranche of loans from sparebanken sogn og Fjordane was bought in March 2009. since then, the market value of residential property has risen. sparebanken sogn og Fjordane services the
loans held by Bustadkreditt sogn og Fjordane As. the loans are performing well, and are closely monitored by the Bank. Around 54.4% of Bustad-kreditt sogn og Fjordane As's loan portfolio has a loan-to-value ratio of less than 60%. the company considers its loan portfolio to be low-risk. the figure shows the weighted loan-to-value ratio for the loans held by the company.
the performance of the loan portfolio is moni-tored monthly through a credit report which sets out areas such as the composition of the portfolio by risk group, loan performance and the impact of a fall in property prices and higher default rates on the cover pool.
the company's counterparty risk derives from investments in financial markets and exposure to other financial institutions. there are limits on the company's exposure to any given counterparty. in order to protect itself against losses, the company only has exposure to financially sound counterparties.
Liquidity risk
liquidity risk is the risk that the company will be unable to repay its debts when they are due. the company's liquidity buffer shall be sufficient to allow it to repay all of its debts when they are due. the company manages its liquidity position in accordance with the minimum liquidity buffer required by the Board. the actual liquidity risk is within the internal limits that have been set. Interest rate risk
the company shall manage its interest rate risk in such a way as to ensure that it has little exposure to interest rate fluctuations. credit spread risk is managed through limits on exposure to credit risk that incorporate maximum terms to maturity for securities. there are also limits on the interest level risk, which is reported on a monthly basis.
Weighted loan-to-value ratio
0 5 10 15 20 25 30 35 40 45 over 75% 60-75% 50-60% 40-50% Under 40% 21 % 15 % 19 % 42 % 4 %
6 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011 Foreign currency risk
the company does not have any foreign-currency-denominated loans or other foreign-currency- denominated investments.
STAFF, ORGANISATIONAL STRUCTURE AND EXECUTIVE BODY
Bustadkreditt sogn og Fjordane As has an agreement with sparebanken sogn og Fjordane setting out the terms on which loans are
purchased, transferred and serviced. other tasks are carried out by employees at sparebanken sogn og Fjordane. services are performed in accordance with agreements setting out which services are provided and at what price. the agreements are updated as required. the supervisory Board consists of six members, several of whom are, or have been, members of sparebanken sogn og Fjordane's executive committee. the Board of Directors is made up of three members from within the Group and one external member. sparebanken sogn og Fjordane's audit committee also acts as the audit committee for Bustadkreditt sogn og Fjordane As.
the ceo is officially employed by sparebanken sogn og Fjordane.
EMPLOYEES AND WORKING ENVIRONMENT
there are three men and one woman on the Board of Directors. the ceo is a man. the Board of Directors and management believe, like the rest of the Bank, in proactively promoting equal opportunity and preventing discrimination at the work-place.
EQUAL OPPORTUNITY AND DISCRIMINATION
there are three men and one woman on the Board of Directors. the ceo is a man. the Board of Directors and management believe, like the rest of the Bank, in proactively promoting equal opportunity and preventing discrimination at the workplace.
REVIEW OF THE ANNUAL FINANCIAL STATEMENTS
sthe Board believes that the profit and loss
account, balance sheet and notes provide sufficient information about the company's operations and financial position at 31 December 2011. the Board believes that the going concern assumption is appropriate. the Board confirms that the going concern assumption has therefore been used in the preparation of the financial statements for 2011.
POST BALANCE SHEET EVENTS
the Board is not aware of any events after 31/12/2011 that have a material impact on the financial statements or on the company's financial position.
STRATEGY AND PROSPECTS FOR 2012
in 2012, Bustadkreditt sogn og Fjordane As will continue with its core business, which is purchasing residential mortgage loans from sparebanken sogn og Fjordane so that it can issue covered bonds. the target group for its covered bonds is norwegian and international financial institutions and other investors.
Bearing in mind the uncertainty surrounding global economic prospects, the housing market and loan performance will be monitored carefully in 2012. A great deal of work has been put into ensuring that the company has good procedures and high- quality data for the property values that underpin the cover pool. this work will be continued in order to ensure compliance with government rules. the companys covered bonds are sold in financial markets. the company participated in the forum for covered bonds, which aims to coordinate marketing efforts, amongst other things. the company achieved the goals set out in its strategy for 2011, which were discussed in the 2010 annual report.
ALLOCATION OF PROFIT FOR THE YEAR
Bustadkreditt sogn og Fjordane As made a profit of noK 9.9 million. the Board recommends trans-ferring the profit to the company's equity.
hallvard Klakegg chair
peter Midthun Kjetil Joar Bjørset ingeborg Aase Fransson
harald slettvoll ceo
Førde, 2 February 2012
8 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
Profit/loss
Note 2011 2010
interest income 137 937 68 066
interest expenses 115 018 52 721
Net interest income 3, 6 22 919 15 345
commission income 458 223
Net commission income 458 223
net gain/loss on securities 6 – 171 – 147
Total other operating income – 171 – 147
Net other operating income 287 76
Total operating income 23 206 15 421
Wages, salaries, etc. 3 32 0
Administration expenses 3 1 500 964
other operating expenses 5 4 204 1 976
Total operating expenses 8 5 736 2 940
Operating profit/loss before loan impairment charge 17 471 12 482
loan impairment charge 7, 15 3 788 1 421
Operating profit/loss 13 683 11 061
tax expense 9 3 831 3 103
Profit for the reporting period 9 851 7 957
COMPREHENSIVE INCOME
Profit/loss for the financial year 9 851 7 957
Balance sheet
Note 2011 2010
ASSETS
loans and advances to credit institutions 3, 11 64 488 69 932
Gross loans to customers 13 4 907 800 2 604 034
collectively assessed impairment provisions 7, 15 – 7 416 - 3 628
net loans to customers 4 900 384 2 600 406
Financial assets measured at fair value through profit or loss:
commercial paper and bonds 10, 12 199 484 99 794
Deferred tax 9 489 248
earned income not received 16 5 828 2 688
Total assets 5 170 672 2 773 068
SHAREHOLDERS’ EQUITY AND LIABILITIES Paid-up equity
share capital 375 000 200 000
Total paid-up equity 375 000 200 000
Retained earnings
other equity 21 28 597 18 746
Total retained earnings 28 597 18 746
Total equity 403 597 218 746
Debt
Debt to credit institutions 17 754 132 195 479
other financial liabilities:
issued commercial paper and bonds 18 3 994 008 2 347 471
tax payable 9 4 072 3 124
other liabilities/Accrued costs 19 14 862 8 249
Total liabilities 4 767 073 2 554 323
Total liabilities and equity 5 170 672 2 773 068
hallvard Klakegg chair
peter Midthun Kjetil Joar Bjørset ingeborg Aase Fransson harald slettvoll
ceo Førde, 2 February 2012
10 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
Cash flow statement
2011 2010
profit/loss before tax 13 683 11 061
impairment charge 3 788 1 421
tax paid – 3 124 – 1 334
other non-cash transactions 3 473 3 198
A) Net cash flow from operating activities 17 820 14 346
Reduction/increase in loans and advances to customers – 2 303 765 - 1 167 792 Reduction/increase in investments in commercial paper and bonds – 99 690 49 981 B) Net cash flow from investment activities – 2 403 455 - 1 117 811
increase/reduction in loans from credit institutions 558 653 - 93 788
increase/reduction in debt securities 1 646 538 1 147 599
increase/reduction in paid-up share capital 175 000 100 000
C) Net cash flow from financing activities 2 380 191 1 153 811
D) Net cash flow during the year (A+B+C) – 5 444 50 346
opening balance of cash and cash equivalents 69 932 19 586
Closing balance of cash and cash equivalents 64 488 69 932 Details of cash and cash equivalents
Deposits at other financial institutions 64 488 69 932
Equity statement
PAID-UP EQUITY RETAINED EARNINGS
Total paid-up Other Total other Total
Share capital equity equity equity equity
Opening balance 01/01/2010 100 000 100 000 10 789 10 789 110 789
profit for the reporting period 7 957 7 957 7 957
Equity transactions
new paid-up equity 100 000 100 000 100 000
Closing balance 31/12/2010 200 000 200 000 18 746 18 746 218 746 Opening balance 01/01/2011 200 000 200 000 18 746 18 746 218 746
profit for the reporting period 9 851 9 851 9 851
Equity transactions
new paid-up equity 175 000 175 000 175 000
12 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011 1 Accounting principles
2 critical accounting estimates and judgements
3 Remuneration of senior management and the Board of Directors transactions with related parties
4 segments 5 Auditor's fee
6 net income from financial instruments 7 impairment of loans and guarantees 8 operating expenses
9 tax
10 classification of financial instruments 11 loans and advances to credit institutions 12 commercial paper and bonds
13 Breakdown of loans and guarantees 14 loan-to-value and cover pool
15 changes in impairment reserve for loans and guarantees 16 other current assets
17 Debt to credit institutions
18 Debt incurred through the issue of securities 19 other liabilities
20 off-balance-sheet obligations 21 capital adequacy ratio 22 Valuation 23 Risk 24 credit risk 25 credit risk 26 sensitivity analyses 27 Disputes 28 share capital
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NOTE 1 ACCOUNTING PRINCIPLES
GENERAL
the 2011 financial statements for Bustadkreditt sogn og Fjordane As were discussed and adopted at the Board meeting of 2 February 2012.
All amounts in the financial statements and notes are stated in thousands of noK, unless otherwise specified.
ACCOUNTING PRINCIPLES
the financial statements have been prepared in accordance with section 3–9 of the norwegian Accounting Act and the regulations on the simplified application of iFRs issued by the norwegian Ministry of Finance on 21 January 2008. in general this means that recognition and measurement principles follow international accounting standards (iFRs) and that the financial statements and notes are presented in accordance with the norwegian Accounting Act and generally accepted accounting principles.
CHANGES TO ACCOUNTING PRINCIPLES in the event of fundamental accounting reforms/ changes to accounting principles, the figures for previous years must be adjusted to allow accurate comparison. if items in the accounts are reclassified, comparative figures for previous periods shall be calculated and reported in the financial statements.
no changes were made to the accounting principles in 2011.
AMENDMENTS IN 2011 TO STANDARDS AND INTERPRETATIONS APPROVED BY THE EU • Revised IAS 24
information about related parties • Amendments to IAS 32
Financial instruments – presentation • Amendments to IFRIC 14, IAS 19
the limit on a defined benefit asset, minimum funding requirements and their interaction • IFRIC 19 Extinguishing financial liabilities with
equity instruments ESTIMATES
When preparing the financial statements, certain estimates are made that affect reported amounts. note 2 sets out significant estimates and
assumptions in greater detail. Inclusion on the balance sheet
Assets and liabilities are included on the balance sheet from the date on which the company achieves genuine control over the assets and takes on genuine liabilities.
Assets are taken off the balance sheet on the date on which genuine risk relating to the assets is transferred and control over the assets is lost or ceases.
FINANCIAL INSTRUMENTS
Classification of financial instruments A financial instrument is any contract that provides both a financial asset to one enterprise and a financial obligation or an equity instrument to another enterprise.
For the initial calculation, all financial instruments covered by the standard have been identified and classified in one of the following categories, depending on the purpose of the investment:
• Financial assets and liabilities held for trading purposes, measured at fair value through profit and loss • Financial assets and liabilities measured at fair value with changes in fair value recognised in profit or loss, in accordance with the Fair Value Option • Loans and advances, carried on the balance sheet at amortised cost – Financial assets and liabilities held for trading purposes, measured at fair value through profit and loss
the trading portfolio contains instruments that were mainly acquired or taken on with the aim of being resold or bought back in the short term, or instruments that are part of a portfolio of identified instruments that are managed jointly and for which there is an established pattern of realising short-term gains. Financial derivatives are always measured at fair value through profit and loss.
– Financial assets and liabilities measured at fair value with changes in fair value recognised
in profit or loss, in accordance with the Fair Value Option, referred to as FVO
this portfolio includes investments in commer-cial paper and bonds. the above-mentioned instruments, as well as interest rate swaps, are managed collectively and measured at fair value.
– Loans and advances, carried on the balance sheet at amortised cost
this category includes all loans and advances that are not defined at their fair value in the profit and loss account, or as financial assets available for sale. commercial paper borrow-ings are included in this category.
Valuation
Initial valuation of financial instruments
Financial instruments are included on the balance sheet at their fair value at the transaction date.
14 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011 Subsequent valuations
Calculating fair value
Fair value is defined as the amount that an asset or liability can be exchanged for, in a transaction between independent parties. the valuation is based on a going concern assumption, and on the assumption that credit risk has been allowed for.
Instruments that are traded in an active market
A market is considered active if it is possible to obtain external, observable prices, rates or
volatilities, and if these prices represent actual and frequent market transactions. For instruments that are traded in an active market, we use the listed price obtained from a stock exchange, broker or price-setting firm. if there is no price listed for the instrument, we break it down into its components and value it on the basis of the prices listed for the individual components.
instruments traded in an active market include financial instruments that are listed on a stock exchange or that are quoted on some other market, such as shares, bonds and commercial paper. they also include financial derivatives that are based on underlying quoted or stock exchange listed prices/ indexes/ instruments.
Instruments that are not traded in an active market
Financial instruments that are classified in this category are valued using various valuation methods. For example, normal and simple financial instruments are valued using recognised models based on observable market data.
Amortised cost method
Financial instruments that are not valued at fair value, are valued at amortised cost, and income is calculated using the effective interest rate method. this method involves calculating the effective interest rate on the instrument. this is calculated by discounting contractual cash flows over the anticipated term to maturity. cash flows include arrangement fees, direct transaction costs that are not covered by the customer and any residual value when the anticipated term to maturity expires. the amortised cost is the present value of these cash flows discounted by the effective interest rate.
Impairment of financial assets
Individually assessed impairment provisions
if there is objective evidence that it has fallen in value, a loan is written down by the difference between the carrying amount of the loan and the current value of the estimated future cash flows discounted by the loan's effective interest rate. the effective interest rate used is the loan's effective interest rate before evidence of a fall in
value was identified, adjusted for changes in the market rate up to the impairment date. changes in interest rates as a result of changes in the credit risk associated with the loan are not taken into account when adjusting the effective interest rate used for discounting purposes.
objective evidence that a loan or group of loans has fallen in value includes significant financial problems at the debtor, default or other major breaches of contract, cases where it is likely that the debtor will try to renegotiate his debt and other specific events that have occurred. individually assessed impairment provisions reduce the loan's carrying amount, and changes in valuations for the reporting period are recognised in the profit and loss account under “loan impairment charge”. interest on loans that have previously been impaired is calculated using the discount rate that was used to calculate the impairment. interest calculated on the present value of the loan is included under “net interest income”.
Collectively assessed impairment provisions
loans that have not been individually tested for impairment, are assessed collectively in groups. these assessments are based on objective evidence of falls in value on the balance sheet date that can be linked to the group.
the groups are defined as loans with similar risk and valuation patterns based on the classification of customers by risk classes. the need for impairment provisions is calculated for each customer group on the basis of an assessment of the current economic climate and historical losses for the customer group in question.
collectively assessed impairment provisions reduce the loans' carrying amount. changes in valuations for the reporting period are recognised in the profit and loss account under “loan impairment charge”. like individually assessed impairment provisions, collectively assessed provisions are calculated on the basis of discounted cash flows. cash flows are discounted using market interest rates. Presentation on the balance sheet and in the profit and loss account
Loans
loans are shown on the balance sheet, depending on who the counterparty is, under either “loans and advances to credit institutions” or “loans to customers”, regardless of how they have been valued.
interest income from financial instruments classified as loans is included under “interest income” using the effective interest rate method, regardless of the valuation method used. the effective interest rate method is described under “Amortised cost method”.
impairment provisions as a result of identifiable, objective evidence of a fall in value on the balance sheet date are included under “loan impairment charge”.
Commercial paper and bonds
his portfolio includes commercial paper and bonds defined as assets measured at fair value with changes in fair value recognised in profit or loss (FVo).
interest income and expenses on commercial paper and bonds are included under “net interest income” using the effective interest rate method. this method is described in the paragraph on amortised cost.
other changes in value are included under “net gains/losses on financial instruments measured at fair value”.
Debt to credit institutions
liabilities to credit institutions are recorded as “Debt to credit institutions” regardless of the calculation method used. interest expenses on these instruments are included under “interest expenses” using the effective interest rate method. other changes in value are included under “net gains/losses on financial instruments measured at fair value”.
Debt securities
Debt securities include commercial paper, bonds and subordinated debt issued by the Bank, regard-less of the valuation method. interest expenses on these instruments are included under “net interest income” using the effective interest rate method. other changes in value are included under “net gains/losses on financial instruments measured at fair value”.
TAXATION
the tax expense stated in the profit and loss account includes both tax payable on income and assets, and changes to deferred tax for the financial period. Deferred tax/ deferred tax assets are calculated by applying a 28% tax rate to temporary differences that exist between accounting and taxable values at the close of the year. Deferred tax is calculated using the tax rates
and regulations that apply on the balance sheet date, or that are very likely to be adopted and will apply when the deferred tax asset is realised or the deferred tax becomes payable.
Deferred tax assets are included on the balance sheet on the assumption that the Bank will have taxable income as a result of profits in future years.
tax payable and deferred tax are charged to equity if the tax relates to items that in the current or previous periods have been taken to equity. ACCRUAL OF INTEREST AND FEES
interest and commission are recognised in the profit and loss account as they accrue as income or expenses. Arrangement fees for loans are included in the cash flow when calculating the amortised cost, and are taken to income under “net interest income” using the effective interest rate method.
RECOGNITION OF INTEREST INCOME
interest income is recognised in the profit and loss account using the effective interest rate method. this involves taking arising nominal interest plus amortised set-up fees to income. interest income is calculated using the effective interest rate method both for balance sheet items measured at amortised cost and for ones measured at fair value through profit and loss. interest income on
impaired loans is calculated as the effective interest rate on the carrying value.
CASH FLOW STATEMENT
the cash flow statement shows cash flows grouped by source and area of use. cash is defined as cash and receivables from central banks, and instant access deposits with credit institutions.
POST BALANCE SHEET EVENTS
post balance sheet events shall be reported in accordance with iAs 10. events that are not covered by the financial statements, but that are material to any evaluation of the company, shall be disclosed.
16 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
NOTE 3 REMUNERATION OF SENIOR MANAGEMENT AND THE BOARD OF DIRECTORS. TRANSACTIONS WITH RELATED PARTIES
Remuneration of senior management and the Board of Directors
the company hires its ceo from sparebanken sogn og Fjordane on a contract basis. the ceo has received no remuneration from the company. the Board of Directors has one external member. the external member receives a fee.
FiGuRes in Whole noK
Board of Directors Remuneration Loans at 31/12/2011
hallvard Klakegg 0 0
Kjetil Joar Bjørset 0 1 762 113
ingeborg Aase Fransson 0 0
peter olav Midthun 25 000 0
Audit committee
Knut Jon sunde 0 2 359 767
solicitor Andreas Rønnekleiv 0 0
ingrid Kassen 0 1 457 777
FiGuRes in noK '000s
Intra-group transactions 2011 2010
interest received from sparebanken sogn og Fjordane 3 176 1 475
interest paid to sparebanken sogn og Fjordane 18 123 7 828
interest paid to sparebanken sogn og Fjordane on covered bonds 45 877 36 026
services bought from sparebanken sogn og Fjordane 2 039 1 433
estimates and judgements are continuously reassessed, and are based on past experience and other factors, such as expectations of future events that are considered probable.
the company prepares estimates and makes assumptions about future developments.
Accounting estimates produced on this basis rarely entirely correspond with what actually happens. estimates that constitute a significant risk of changes to the carrying value of assets and liabilities over the coming financial year are discussed below.
Fair value of financial instruments
For securities that are not listed and for which there is not an active market, the company uses valuation techniques to determine their fair value. the company makes its assessments and uses methods and assumptions that in so far as it is possible are based on market conditions on the balance sheet date. Valuations are based on the most recent private placement price, any trans-action prices that we are aware of and discounted cash flows. We also obtain valuations and
estimated credit spreads from external brokers. Loan impairment charge
An impairment provision shall be made when there is objective evidence of a fall in value. objective evidence that a loan or group of loans has fallen in value includes significant financial problems at the debtor, default or other major breaches of con-tract, cases where it is considered likely that the debtor will try to renegotiate his debt and other
specific events that have occurred. to decide whether there exists objective evidence justifying collectively assessed impairment provisions, we use models that have been developed to calculate credit risk, as well as our own data on the loans' statistical remaining term to maturity.
All impairment provisions are based on discounted values, with the loan's internal rate of return before impairment being used as the discount rate. in principle, all cash flows from loans and groups of loans must be identified, and an assessment must be made as to what cash flows are at risk of default. With the large number of loans that are subject to assessment at an individual level, these calculations have to be based on the specifics of the loans and past experience. the models that are used to calculate credit risk are evaluated and validated regularly. this is also true of the model for collectively assessed impairment provisions for groups of loans. changes are implemented in order to ensure that estimates of future losses are based on past experience and our knowledge of the Bank's portfolio and the macroeconomic prospects.
For further details of the approach to individually and collectively assessed provisions, see note 1 Accounting principles.
Contingent liabilities
From time to time, Bustadkreditt sogn og Fjordane As will be involved in legal disputes. the potential impact on the financial statements will be assessed on a case-by-case basis.
Intra-group transactions, cont. 2011 2010
Deposits at sparebanken sogn og Fjordane 64 488 69 932
liabilities to sparebanken sogn og Fjordane 753 831 195 479
covered bonds held by sparebanken sogn og Fjordane 1 479 530 1 319 810 Bustadkreditt sogn og Fjordane As has no employees and purchases business services from sparebanken sogn og Fjordane. All of the company's loans have been acquired from sparebanken sogn og Fjordane, and an agreement has been signed with the bank on the servicing of the portfolio.
transactions comply with arm's length principles.
For further information about credit facilities, etc., see note 17.
NOTE 4 SEGMENTS
the company mainly operates in one segment, which is residential mortgages to retail customers, in addition there is also a small volume of residential mortgages to private business. All of the company's loans have been bought from sparebanken sogn og Fjordane. the company does not have any operations outside norway. customers with overseas addresses are classified as part of the norwegian operations.
NOTE 5 AUDITOR’S FEE
2011 2010
statutory audit 90 56
Fee paid to Deloitte as independent inspector 115 104
other services 111 0
Total 316 160
NOTE 6 ET INCOME FROM FINANCIAL INSTRUMENTS
Net interest income 2011 2010
interest income and similar income from loans and advances
to credit institutions, measured at amortised cost 3 176 0
interest income and similar income from loans and
advances to customers, measured at amortised cost 131 740 64 231
interest income and similar income from commercial paper and other
interest-bearing securities, measured at fair value 3 021 2 360
other interest and similar income from receivables measured at fair value 0 1 475
Total interest income 137 937 68 066
interest and similar charges on debt to credit institutions, measured at amortised cost 9 460 0 interest and similar charges on issued securities, measured at amortised cost 96 878 44 870 other interest and similar charges on debt, measured at amortised cost 8 680 7 851
Total interest expenses 115 018 52 721
Total net interest income 22 919 15 345
Net gain/loss on securities
Bonds, commercial paper and other interest-bearing securities measured at fair value through profit or loss
commercial paper and bonds issued by the public sector 43 – 32
commercial paper and bonds issued by the other parties – 214 – 115
Net income and gains from financial instruments
measured at fair value – 171 – 147
NOTE 7 LOAN IMPAIRMENT CHARGE
Loan impairment/recoveries during the period 2011 2010
new individually assessed impairment provisions for the period 0 0
change in collectively assessed impairment provisions for the period 3 788 1 421
other adjustments to impairment provisions 0 0
Amounts written off against impairment provisions 0 0
losses realised for which no provision had previously been made 0 0
Recoveries of amounts previously written off 0 0
18 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 8 OPERATING EXPENSES
2011 2010
Fees and social security costs 32 0
it expenses 1 453 964
other expenses 47 0
Total wages, salaries and general administration expenses 1 532 964
purchase of services from the Group 2 039 1 433
Auditor's fee 316 160
expenses on bond debt 373 314
outside consultants 1 459 49
other operating expenses 17 19
Total other operating expenses 4 203 1 976
Total operating expenses 5 736 2 940
NOTE 9 TAX
TAX EXPENSE 2011 2010
tax payable for the period 4 072 3 124
Total tax payable 4 072 3 124
Change in deferred tax/tax assets
Deferred tax relating to the origination and reversal of temporary differences – 241 - 20
Total change in deferred tax/tax assets – 241 - 20
Total tax expense 3 831 3 103
Reconciliation of expected tax expense with actual tax expense
profit/loss before taxation 13 683 11 061
expected income tax applying nominal tax rate of 28% 3 831 3 097
other differences 0 6
Tax expense 3 831 3 103
tax payable 4 072 3 124
Tax payable on balance sheet 4 072 3 124
BREAKDOWN OF THE TAX IMPACT OF TEMPORARY DIFFERENCES
Deductible temporary differences
Financial instruments 1 079 53
loss carryforwards 667 833
Total deductible temporary differences 1 746 886
Net difference 1 746 886
Net deferred tax assets/tax (–) on the balance sheet 489 248 Deferred tax assets are only recognised to the extent that it is
NOTE 10 10 CLASSIFICATION OF FINANCIAL INSTRUMENTS
2011 2010
BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE
Net loans and advances to credit institutions loans and advances to credit institutions
measured at amortised cost 64 488 64 488 69 932 69 932
Total loans and advances to credit institutions 64 488 64 488 69 932 69 932 Bonds and commercial paper
commercial paper and bonds measured
at fair value *) 199 484 199 484 99 794 99 794
Total bonds and other securities 199 484 199 484 99 794 99 794 Net loans to customers
loans to customers measured
at amortised cost 4 907 800 4 907 800 2 604 034 2 604 034
Total loans before individually
and collectively assessed impairment provisions 4 907 800 4 907 800 2 604 034 2 604 034
– individually assessed impairment provisions 0 0 0 0
– collectively assessed impairment provisions – 7 416 – 7 416 - 3 628 - 3 628 Total net loans to customers 4 900 383 4 900 383 2 600 406 2 600 406 Other assets
other assets, amortised cost 5 828 5 828 2 688 2 688
Total other assets 5 828 5 828 2 688 2 688
Total financial assets 5 170 183 5 170 183 2 772 820 2 772 820 Financial assets grouped by category
Financial assets measured
at fair value, FVo *) 199 484 199 484 99 794 99 794
Financial assets measured at amortised cost,
loans and advances 4 970 699 4 970 699 2 673 026 2 673 026
Total financial assets 5 170 183 5 170 183 2 772 820 2 772 820 Debt to credit institutions
loans and deposits from credit institutions
measured at amortised cost 754 132 754 132 195 479 195 479
Total debt to credit institutions 754 132 754 132 195 479 195 479 Debt securities
uissued commercial paper and bonds
measured at amortised cost 3 994 008 3 994 930 2 347 471 2 332 030 Total debt securities 3 994 008 3 994 930 2 347 471 2 332 030 Other financial liabilities
other debt measured at amortised cost 14 850 14 850 8 249 8 249
Total other financial liabilities 14 850 14 850 8 249 8 249 Total financial liabilities 4 762 990 4 763 911 2 551 199 2 535 758 Financial liabilities grouped by category
Financial liabilities designated at fair value, FVo *)
Financial liabilities at
amortised cost, loans and advances 4 762 990 4 763 911 2 551 199 2 535 758 Total financial liabilities 4 762 990 4 763 911 2 551 199 2 535 758 *) FVo: Fair Value option
NOTE 11 LOANS AND ADVANCES TO CREDIT INSTITUTIONS
2011 2010 total loans and advances to credit inst. without an agreed term at amortised cost *) 64 488 69 932 total loans and advances to credit inst. with an agreed term at amortised cost *) 0 0 Total loans and advances to credit institutions measured at amortised cost 64 488 69 932 *) overdraft/running account that Bustadkreditt sogn og Fjordane As has with sparebanken sogn og Fjordane.
20 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 12 COMMERCIAL PAPER AND BONDS
Commercial paper and bonds measured at fair value, for which changes in fair value are recognised in the profit and loss account
2011 2010
COMMERCIAL COMMERCIAL
PAPER BONDS TOTAL PAPER BONDS TOTAL
commercial paper and bonds,
bonds, book value 99 506 99 978 199 484 49 794 50 000 99 794
of which listed
on a stock exchange 99 506 0 99 506 49 794 0 49 794
Face value 100 000 100 000 200 000 50 000 50 000 100 000
Distribution by sector
Finance, banking and insurance 0 99 978 99 978 0 50 000 50 000
Government and
government-backed 99 506 0 99 506 49 794 0 49 794
Total 99 506 99 978 199 484 49 794 50 000 99 794
Modified duration 0,22 0,16 0,19 0,21 0,16 0,19
Average
effective interest rate at 31 Dec. 1,28 % 3,71 % 2,30% 2,06 % 2,89 % 2,43 % Maturity structure of investments in bonds and commercial paper (market value)
2011 0 0 0 49 794 0 49 749 2012 99 506 0 99 506 0 0 0 2013 0 0 0 0 0 0 2014 0 0 0 0 0 0 2015 0 50 000 50 000 0 50 000 50 000 2016 0 49 978 49 978 0 0 0
All securities are noK-denominated.
the weighting used to calculate the average effective interest rate for the whole portfolio is based on the individual security's share of the overall interest rate sensitivity.
NOTE 13 GEOGRAPHIC DISTRIBUTION OF LOANS AND GUARANTEES
2011 2010
loans to customers measured at amortised cost 4 907 800 2 604 034
Total gross loans to customers 4 907 800 2 604 034
individually assessed impairment provisions 0 0
collectively assessed impairment provisions (see note 15) 7 416 3 628
Net loans to customers 4 900 384 2 600 406
Distribution of loans by sector and industry
2011 2010
employees, etc. 4 907 800 2 604 034
Total 4 907 800 2 604 034
Geographic distribution 2011 2010
Gross loans Share Gross loans Shares
oslo 535.355 10,91 % 279 612 10,74 % Akershus 356 747 7,27 % 232 492 8,93 % eastern norway 193 412 3,94 % 117 819 4,52 % southern norway 33 105 0,67 % 7 596 0,29 % Western norway 3 717 460 75,75 % 1 906 785 73,22 % central norway 42 762 0,87 % 42 360 1,63 %
northern norway, svalbard 16 480 0,34 % 13 778 0,53 %
international 12 479 0,25 % 3 592 0,14 %
Total gross loans by geographic area 4 907 800 100,00 % 2 604 034 100,00 % Bustadkreditt sogn og Fjordane As has issued no guarantees to customers.
NOTE 14 LOAN-TO-VALUE RATIO AND COVER POOL
2011 2010
Gross loans to customers 4 907 800 2 604 034
Average volume per loan 1 039 952
number of loans 4 722 2 850
total value of properties securing the loans 12 836 870 9 555 717
Weighted average loan age (months) 30 35
Weighted average remaining term (months) 172 144
Weighted loan-to-value ratio 55 % 52 %
composition of cover pool:
Residential mortgages 1) 4 897 680 2 593 726
substitute assets 2) 263 972 99 771
Total 5 161 652 2 693 497
1) under the regulations relating to credit institutions that issue covered bonds, the loan-to-value ratio
cannot exceed 75%. At 31/12/2011, the company had noK 10.1 million exceeding that limit. that amount was therefore not included when calculating the cover pool.
2) substitute assets consist of investments in short-term government debt and covered bonds with an AAA
rating, and deposits with the parent bank.
NOTE 15 IMPAIRMENT OF LOANS AND GUARANTEES
2011 2010
individually assessed impairment provisions at 1 Jan. 0 0
Amounts written off against individually assessed impairment provisions during the year 0 0
new individually assessed impairment provisions for the year 0 0
Recoveries against individually assessed impairment provisions for the year 0 0
other adjustments to impairment provisions 0 0
Individually assessed impairment provisions at 31 Dec. 0 0
collectively assessed impairment provisions at 1 Jan. 3 628 2 207
increase in collectively assessed impairment provisions for the year 3 788 1 421 Collectively assessed impairment provisions at 31 Dec. 7 416 3 628
Total impairment provisions 7 416 3 628
NOTE 16 OTHER CURRENT ASSETS
2011 2010
Accrued interest on loans 5 446 2 567
Accrued interest on bonds 381 121
Total other current assets 5 828 2 688
NOTE 17 DEBT TO CREDIT INSTITUTIONS
2011 2010 total debt to credit inst. without an agreed term at amortised cost 354 132 195 479 total debt to credit inst. with an agreed term at amortised cost 400 000 0 Total debt to credit institutions, measured at amortised cost 754 132 195 479 the company has arranged a noK 750 million credit facility with sparebanken sogn og Fjordane, running for three years from December 2011, which is primarily intended to finance the purchase of loans and the redemption of covered bonds. the company also has an arrangement that allows it to borrow up to noK 600 million from the bank, depending on the volume of covered bonds that it issues. the bank has also undertaken to finance the funds available to the holders of flexible mortgages and future repayments of covered bonds. All agreements adhere to arm's length principles.
22 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 18 DEBT INCURRED THROUGH THE ISSUE OF SECURITIES
FACE ISSUE MATURITY BOOK VALUE BOOK VALUE
ISIN NUMBER VALUE CURRENCY INTEREST RATE DATE DATE 2011 2010
no0010504194 400 000 noK Variable rate 30.03.09 17.08.15 399 920 399 920 no0010504194 300 000 noK Variable rate 14.05.09 17.08.15 299 940 299 940 no0010504194 500 000 noK Variable rate 22.06.09 17.08.15 500 000 500 000 no0010572290 100 000 noK Variable rate 20.04.10 27.04.15 100 000 100 000 no0010582299 300 000 noK Variable rate 24.06.10 28.06.13 299 739 299 739 no0010572290 300 000 noK Variable rate 21.09.10 27.04.15 299 520 299 520 no0010593155 300 000 noK Variable rate 01.12.10 10.03.16 298 530 298 530 no0010572290 150 000 noK Variable rate 14.12.10 27.04.15 149 700 149 700 no0010625619 300 000 noK Variable rate 27.10.11 28.06.16 298 071 no0010593155 400 000 noK Variable rate 25.03.11 10.03.16 398 200
no0010625619 300 000 noK Variable rate 21.09.11 28.06.16 299 970 no0010572290 150 000 noK Variable rate 28.09.11 27.04.15 150 135 no0010630973 500 000 noK Variable rate 30.11.11 07.12.15 499 300
Amortisation 983 122
Total debt incurred through the issue of securities 3 994 008 2 347 471 All loan agreements are subject to standard covenants.
in 2011, Bustadkreditt sogn og Fjordane As met all of the relevant conditions.
NOTE 19 OTHER LIABILITIES
2011 2010
Accrued costs and advance income 14 351 8 189
other liabilities 511 60
Total other liabilities 14 862 8 249
NOTE 20 OFF-BALANCE-SHEET OBLIGATIONS
2011 2010
Available funds, flexible mortgages 560 897 312 963
Total contingent liabilities 560 897 312 963
Available funds represent credit limits that have been authorised, but not used, within flexible mortgages. the company has no other off-balance-sheet obligations.
NOTE 21 CAPITAL ADEQUACY
Equity and subordinated debt 2011 2010
share capital 375 000 200 000
other equity 28 597 18 746
Equity 403 597 218 746
Deductions:
Deferred tax assets – 489 - 248
Core capital 403 108 218 498
Net equity and subordinated loan capital 403 108 218 498 Minimum requirement for equity and subordinated debt
Credit risk
Of which:
institutions 1 032 1 132
Retail loans 4 174 5 840
Residential mortgage loans 143 504 74 499
overdue advances 0 100
covered bonds 800 401
other advances 23 223
Total minimum requirement for credit risk 149 533 82 195
Operational risk 2 519 2 038
Deductions:
collectively assessed impairment provisions – 593 - 290
Minimum requirement for equity and subordinated debt 151 459 83 943 Capital adequacy
capital adequacy ratio 21,29 % 20,82 %
core capital ratio 21,29 % 20,82 %
the capital adequacy ratio has been calculated using the new capital adequacy regulations (Basel ii). the standard method has been used for credit risk and market risk, whilst the basic method has been used for operational risk. the minimum capital requirement is 8.00%.
there are three pillars to the Basel ii regulations. pillar 1 relates to minimum capital adequacy requirements, and builds on the previous regulations in Basel i. pillar 2 relates to the institution's internal assessment of total capital requirements (icAAp), whilst pillar 3 covers disclosure requirements for financial information.
NOTE 22 VALUATION
Breakdown of financial assets measured at fair value Bonds and other fixed-interest securities
QUOTED PRICES AND
OBSERVABLE ASSUMPTIONS BOOK VALUE 2011 2010 2011 2010
Finance, banking and insurance 99 764 50 000 99 764 50 000
Government and government-backed 99 720 49 794 99 720 49 794
Total 199 484 99 794 199 484 99 794
Bonds and other fixed-interest securities
norwegian short-term government debt is valued at its most recent price on the stock exchange. other norwegian bonds and securities are measured at fair value based on valuation techniques. the valuation techniques incorporate yield curves and credit spreads supplied by external parties, and valuations are quality assured at year-end, primarily by comparing our prices with those of other valuers.
24 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 23 RISK
Bustadkreditt sogn og Fjordane As is exposed to credit risk, operational risk, liquidity risk and interest rate risk. credit risk is the most significant of these. capital adequacy has been calculated by measuring credit risk using the standardised approach and operational risk using the basic indicator approach. limits have been set on exposure to the various classes of risk. the Board considers it a priority for the company to maintain a low risk exposure.
Credit risk
Bustadkreditt sogn og Fjordane As is exposed to credit risk through residential mortgages, and to counterparty risk through its investments in financial markets.
the loans that it purchases from sparebanken sogn og Fjordane have good collateral. At the time of purchase, the loan must represent no more than 75% of the approved value of the collateral. the values of properties used as collateral for residential mortgage loans are updated quarterly. Valuations by eiendomsverdi As are used to determine the approved values of the properties the first tranche of loans from sparebanken sogn og Fjordane was bought in March 2009. since then, the market value of residential property has risen. sparebanken sogn og Fjordane services the loans held by Bustadkreditt sogn og Fjordane As. the loans are performing well, and are closely monitored by the Bank. Around 54.4% of Bustad-kreditt sogn og Fjordane As's loan portfolio has a loan-to-value ratio of less than 60%. the company considers its loan portfolio to be low-risk. the figure shows the weighted loan-to-value ratio for the loans held by the company.
the loans held by BsF are issued by sparebanken sogn og Fjordane, and the credit scoring of mortgage customers therefore follows the credit scoring procedures of the parent bank. customers who apply for a mortgage are carefully assessed on the basis of the collateral, their ability to service the
loan, their debt levels and the probability of default. the probability of default is calculated in the model for application scoring. consideration is also given to the risk associated with factors such as the customer's situation in life, employment situation and education. procedures have also been put in place for transferring loans to the company, specifying the criteria that must be fulfilled by the loans in order for them to be moved to the company. these criteria meet all of the regulatory requirements, and they also include extra
restrictions specified by the company on what loans it will accept. loans that are held by the company are also monitored very carefully in relation to non-performance. if a loan is more than 30 days in arrears, the administrative team contacts the account manager, and measures are implemented to bring the loan current.
the company also has risk management procedures in place that have been approved by the Board, which set out the checks that must be made in order to minimise credit risk, and allocate responsibility for carrying out the checks and for reporting.
the performance of the loan portfolio is monitored monthly through a credit report which sets out areas such as the composition of the portfolio by risk group, loan performance and the impact of a fall in property prices and higher default rates on the cover pool.
the company's counterparty risk derives from investments in financial markets and exposure to other financial institutions.
there are limits on the company's exposure to any given counterparty. in order to protect itself against losses, the company only has exposure to financially sound counterparties.
Liquidity risk
liquidity risk is the risk that the company will be unable to repay its debts when they are due. the company's liquidity buffer shall be sufficient to allow it to repay all of its debts when they are due. the company manages its liquidity position in accordance with the minimum liquidity buffer required by the Board.
Interest rate risk
the company shall manage its interest rate risk in such a way as to ensure that it has little exposure to interest rate fluctuations. exposure to changes in interest rate spreads is limited by the rules on credit risk. there are also limits on the exposure to changes in the absolute level of interest rates. Foreign currency risk
the company does not have any foreign-currency-denominated loans or other foreign currency- denominated investments.
Weighted loan-to-value ratio
0% 5% 10% 15% 20% 25% 30% 35% over 75% 60–75% 50–60% 40–50% Under 40%
Operational risk
operational risk is defined as the risk of losses due to human error, external actions or failures and defects in the company's systems, procedures and processes.
laws and regulations set out specific requirements relating to various records that have to be kept. this is partly to make it possible to check that the loans transferred to the company genuinely satisfy all of the relevant requirements. section 11 of the regulations requires there to be a database for the cover pool detailing the loans, forward interest rate and currency contracts, substitute assets, as well as covered bonds. the Bank has established a database that satisfies the requirements of the regulations. establishing these databases will make it easier for the Bank to uncover errors or defects with the company's loan portfolio. in order to make sure that the company always has sufficient collateral for its borrowings, the cover pool is monitored on a daily basis, and checks are performed to confirm compliance with regulatory requirements and internal rules. in addition, stress tests are carried out in order to ensure that requirements relating to surplus liquidity and cover pools would be met under a variety of scenarios.
NOTE 24 CREDIT RISK
CREDIT RISK BY CLASS OF FINANCIAL INSTRUMENT
MAXIMUM EXPOSURE 2011 2010
Bonds and commercial paper 199 484 99 794
total loans and advances to customers 5 478 399 2 916 945 loans and advances to credit institutions 64 448 69 932
Total 5 742 331 3 086 671
Advances to credit institutions consist of deposits held at sparebanken sogn og Fjordane, which has an A3 rating.. CREDIT RISK RELATING TO BONDS AND COMMERCIAL PAPER
Credit risk by counterparty
Interest-bearing securities
Debtor category by guarantor AAA-rated AA-rated A-rated BBB-rated Non-investment 2011 total 2011 total fair fair fair fair grade fair fair value value value value fair value value value
Finance, banking and insurance 99 764 0 0 0 0 99 764 50 000 Government and government-backed 99 720 0 0 0 0 99 720 49 794
Total 199 484 0 0 0 0 199 484 99 794
standard & poor's ratings have been used. Changes in value
total change in book value - 165 0 0 0 0 - 165 – 46
changes in value recognised in the
profit and loss account for the period - 171 0 0 0 0 - 171 – 46 customers with residential mortgage loans are assessed according to the willingness and ability to repay their loans. When customers apply for a loan, they are subjected to a risk assessment and their debt servicing ability is calculated. the loan-to-value ratio of Bustadkreditt sogn og Fjordane As's residential mortgage loans is less than 75% at the time they are transferred from sparebanken sogn og Fjordane. the credit quality of loans that are not in arrears is high. Bustadkreditt sogn og Fjordane As's collateral consists of mortgages on residential properties. We consider the collateral for the portfolio to be very good. no accounts are over 90 days in arrears. the credit risk associated with the portfolio is low.
LOANS BY CUSTOMER GROUPS
Gross Individually Net Loans and Unused Average non- assessed non-advances to Guaran- credit- Total loan performing impairment performing customers tees facilities balance value assets provisions assets
employees, etc. 4 895 321 0 560 897 5 456 218 1 040 0 0 0
overseas 12 479 0 0 12 479 891 0 0 0
Total 4 907 800 0 560 897 5 468 697 1 039 0 0 0
– collectively assessed
impairment provisions 3 788 0 0 3 788
+ other changes in value 0 0 0 0
26 Bustadkreditt sogn og Fjordane As AnnuAl RepoRt 2011
NOTE 24 CREDIT RISK (cont.)
GEOGRAPHIC DISTRIBUTION OF LOANS
Loans and Unused Gross non- Individually Net
non-advances to Guaran credit Total performing assessed performing
customers tees facilities balance assets impairment provisions assets
eastern norway 1 085 514 0 133 352 1 218 866 0 0 0 Western norway 3 717 460 0 417 172 4 134 632 0 0 0 southern norway 33 105 0 3 276 36 381 0 0 0 central norway 42 762 0 6 372 49 134 0 0 0 northern norway 16 480 0 725 17 205 0 0 0 overseas 12 479 0 0 12 479 0 0 0 Total 4 907 800 0 560 897 5 468 697 0 0 0
TOTAL VALUE OF LOANS BY REMAINING TERM TO MATURITY
Loans and advances to customers Guarantees Unused credit facilities Total balance
up to 1 month 0 0 0 0 1 – 3 months 514 0 0 514 3 months – 1 year 1 446 0 0 1 446 1 – 5 years 194 387 0 76 005 270 392 over 5 years 4 711 453 0 484 892 5 196 345 Total 4 907 800 0 560 897 5 468 697
AGED ANALYSIS OF LOANS IN ARREARS FOR WHICH NO SPECIFIC IMPAIRMENT PROVISION HAS BEEN MADE Loans and advances to customers Guarantees Unused credit facilities Total balance
1 – 30 days in arrears 6 064 0 0 6 064
31 – 60 days in arrears 795 0 0 795
61 – 90 days in arrears 0 0 0 0
over 90 days in arrears 0 0 0 0
Total 6 859 0 0 6 859
GEOGRAPHIC DISTRIBUTION OF LOANS MORE THAN 90 DAYS IN ARREARS
Loans and advances to customers Guarantees Unused credit facilities Total balance
eastern norway 0 0 0 0
Western norway 0 0 0 0
central norway 0 0 0 0
northern norway 0 0 0 0
Total 0 0 0 0
the geographic distribution is only provided for non-performing loans. An account is considered non-per-forming when a client is overdrawn for more than 90 days or when a repayment loan is more than 90 days in arrears and the amount in question is at least noK 1000.
CREDIT RISK BY CUSTOMER GROUP
Total impaired Total Total Total Total changes in value
assets balance changes in value impairment provisions through profit or loss for the
periodemployees, etc. 0 5 478 399 0 0 0
Total 0 5 478 399 0 0 0
FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS (FVO)
Bonds and commercial paper 2011 2010
Book value 199 484 99 794
Maximum exposure to credit risk 99 764 50 000
Book value of credit derivatives that hedge credit risk 0 0
change in fair value of assets due to changes in credit risk for the year – 171 - 46 cumulative change in fair value of assets due to changes in credit risk – 171 - 46
change in fair value of associated credit derivatives for the year 0 0
Accumulated change in fair value of associated credit derivatives 0 0
Fair value is determined through a theoretical calculation in which the agreed cash flow is discounted by the interest rate offered on new loans with an equivalent fixed interest period and credit risk. Financial assets are designated at fair value through profit and loss (FVo) upon initial recognition if any other valuation method would result in inconsistencies in the profit and loss account.
NOTE 25 LIQUIDITY RISK
undiscounted cash flows required to meet financial obligations
Without
0–1 1–3 3–12 1–5 >5 an agreed
months months months years years term Total
Debt to credit institutions 0 6 806 20 418 781 356 0 0 808 580
Debt incurred through the
issue of securities 6 637 30 026 110 092 4 405 278 0 0 4 552 032
other liabilities 18 934 0 0 0 0 0 18 934
unused credit facilities 560 897 0 0 0 0 0 560 897
Total 2011 586 468 36 832 130 510 5 186 634 0 0 5 940 444
Without
0–1 1–3 3–12 1–5 >5 an agreed
months months months years year term Total
Debt to credit institutions 0 1 530 4 589 201 597 0 0 207 716
Debt incurred through the
issue of securities 4 357 13 771 54 265 2 263 937 302 381 0 2 638 712
other liabilities 11 373 0 0 0 0 0 11 373
unused credit facilities 312 963 0 0 0 0 0 312 963
Total 2010 328 694 15 301 58 854 2 465 535 302 381 0 3 170 764 the above tables include interest payable. in order to calculate the interest expense on variable-rate borrowing, current interest rates on the reporting date were used.
NOTE 26 SENSITIVITY ANALYSES
Based on the balance sheet at 31 December 2011, any changes in market risk taking place over the coming year will have the following impact on profit and equity.
INTEREST RATES EXCHANGE RATE Innverknad på resultat/eigenkapital - 1,50 % 1,50 % - 12 % 12 %
loans and advances to credit institutions - 696 696 0 0
Bonds and commercial paper - 912 912 0 0
loans to customers - 46 888 46 888 0 0
Debt incurred through the issue of securities 36 217 - 36 217 0 0
Debt to credit institutions 7 458 - 7 458 0 0
Total - 4 822 4 822 0 0
this note sets out the impact on the financial statements over a period of 12 months of an immediate parallel change in interest rates of + 1.5% and – 1.5%. it takes into account ongoing interest income and expenses, the one-off impacts that any such immediate change in interest rates would have on items measured at fair value and the impact of a change in interest rates on profit over remaining fixed interest terms until the change impacts income and expenses.
Note 27 DISPUTES
At 31/12/2011, Bustadkreditt sogn og Fjordane As was not involved in any lawsuits, nor had it received notice of any future lawsuits.
NOTE 28 SHARE CAPITAL AND SHAREHOLDER INFORMATION
At 31 December 2011, the Company’s share capital is made up of the following classes of shares: Number Face value Value
class A sparebanken sogn og Fjordane 3 750 000 100 375 000
shares 3 750 000 375 000
Ownership structure
Biggest shareholders in the Company at 31 December 2011:
Class A Share- Share of
shares Total holding voting right
sparebanken sogn og Fjordane 3 750 000 375 000 100 % 100 %
Total number of shares 3 750 000 375 000 100 % 100 % Neither the members of the Board of Directors nor the CEO own any shares or options.
