Annual report
2013
Annual accounts
Annual report 2013
2 / 33
Nature of the business
SSB Boligkreditt AS is the funding company of the Sandnes
Sparebank Group, for the issue of covered bonds. 2013 is
the Company’s fifth year of operation. The Company has its
registered office at Forus in the municipality of Sandnes.
greater in Sandnes (-1.7%) and Stavanger (-2.4%). Both the
housing market and regional business performance is still
seen as very strong, but the Bank is taking possible negative
developments into account in its strategic planning for the
years ahead.
SSB Boligkreditt AS is a wholly owned subsidiary of Sandnes
Sparebank.
Earnings performance 2013
Figures in parentheses apply to the corresponding period in 2012.
Profits before taxes were NOK 73.6 (50.7) million. After tax
profits were NOK 55.2 (35.4) million.
The Board of Directors considers the Company’s capital
adequacy and liquidity levels to be satisfactory. The financial statements have been prepared on the basis that the
Company will continue operating as a going concern, as this
assumption is justified. The applicable accounting principles
are described in Note 1 to the financial statements.
Market conditions
The global economy experienced a very positive development
during 2013. In Norway, the growth rate has declined for most
industries, yet the Oslo Stock Exchange Benchmark Index was
up by approximately 21%. The shipping, financial, fisheries and
telecom industries were the best contributors to this performance, whereas oil and oil service pulled in the other direction.
In the oil and gas industry there is still a high level of activity,
and the oil price has remained relatively stable. However, there
are several sector companies that are struggling with high
costs, and more staff cuts were announced in the last quarter
of the year than we have seen previously.
The debt financing market for Norwegian banks was stable
throughout the entire 2013. The short interest rates (NIBOR)
fell steadily throughout the year, whereas the long interest
rates (10 year swap) increased softly throughout 2013. In
all sectors, the credit spreads have narrowed. For Sandnes
Sparebank, the indicated credit spread for 5 year financing
(indicated by the VFF curve) went down from +120 basis
points at the start of the year to +88 basis points at the end
of the year. For SSB Boligkreditt, ,the credit spread has also
narrowed significantly, both due to market forces and due to
a new rating being issued during the year.
The Company’s net interest income totalled NOK 103.4 (66.2)
million. Other income was -16.2 (-3.7) million. Other income was
negative in both 2012 and 2013 due to revaluations of financial
derivatives to fair value (in connection with hedging of fixed rate
loans). In 2013, this revaluation amounted to -17.2 million.
In 2013, the Company’s operating costs were NOK 13.8 (11.2)
million. The cooperation with Sandnes Sparebank has been
formalized through a management agreement. The Bank’s
management fee amounted to NOK 9.6 (9.2) million during
2013. Other operating cost increased by NOK 2.5 million from
2012 to 2013, mainly due to rating costs. Some of these costs
were non-recurring. During 2013, NOK -0.2 (0.6) million of
write-downs were made on groups of loans.
Balance sheet and asset management
At the end of 2013, SSB Boligkreditt AS managed assets
totalling NOK 7.1 (6.8) billion. Loans to customers constituted
NOK 6.7 (6.4) billion. At the end of the fourth quarter of 2013,
the Company had issued bonds with a face value of NOK 4.25
(5.3) billion. In addition, the item other liabilities includes debts
to the Parent Company of NOK 2.4 (1.1) billion. This is related
to bridge financing of SSB Boligkreditt’s purchase of a loan
portfolio from Sandnes Sparebank.
The Company’s liquidity situation is satisfactory.
Unemployment is still stable at a low level. According to statistics from the Norwegian Labour and Welfare Service (NAV),
it is slightly down from 2.7% at the start of the year, to 2.6%
at the end of the year, whereas there was a slight increase in
Rogaland, from 1.8% to 2% in the same period.
Risk issues
Pursuant to laws and regulations stipulated by the authorities,
companies with license to issue Covered Bonds (Obligasjoner
med Fortrinnsrett - OMF) should have a low risk level. The
Board of Directors of SSB Boligkreditt emphasizes that the
Company shall identify, measure and manage the various risk
factors in such a way that the confidence in SSB Boligkreditt
is maintained in the market.
In 2013, the housing market was weaker than we have
seen in recent years, and the turnover rate has been rising.
According to the Norwegian Association of Real Estate
Agents, in 2013 there was a marginal price decline of 1.3%
for all of Rogaland. The 2013 price decline was somewhat
Credit risk
As of 12/31/2013, the Company had a portfolio of home loans
valued at NOK 6.7 billion. The weighted loan balance of this
portfolio corresponded to 51% of the valuation of the objects.
No loans were in default at the end of the period.
SSB Boligkreditt Annual report 2013
Annual accounts
3 / 33
The Board of Directors considers the quality of the loan
portfolio as very good, and the credit risk as low.
The Board of Directors is of the opinion that the overall risk
exposure of SSB Boligkreditt is low.
Market risk
Market risk is defined as economic loss due to changes in
observable market variables, such as interest rates, currency exchange rates and prices of financial instruments.
Organization, employees and environment
The Company has entered an agreement with Sandnes
Sparebank regarding the management of the Company’s loan
portfolio. Prices and terms and conditions are adjusted annually. The Company has no employees. Formally, the Managing
Director is employed by Sandnes Sparebank.
SSB Boligkreditt shall carry a low market risk, and has
established exposure limits for both interest rate and
currency risk. The Company will use financial derivatives in
order to keep the abovementioned risks at a low level. As of
12/31/2013, the Company has issued bonds with a nominal
value of NOK 4.25 billion, of which NOK 3.7 billion carry
a floating rate. The Company has positions in Norwegian
Kroner only. With respect to the lending volume, 94% of
the loans carry a floating rate. The Company uses financial
derivatives to hedge interest rate risk, in order to keep it low.
At the end of 2013, the Company had no positions in foreign
currency, and consequently no currency risk.
The Board of Directors considers the overall market risk to
be low.
Liquidity risk
This is the risk of the Company not being able to refinance
upon maturity, or not being able to finance its assets at
market terms. SSB Boligkreditt issues bonds that enables
the Company to extend the maturity of its funding by 12
months if the Company should experience refinancing
problems at the ordinary maturity date.
The Board of Directors considers the Company’s liquidity
risk to be low.
Operational risk
This is the risk of loss due to errors or irregularities in
the handling of transactions, lack of internal controls or
irregularities in the systems used. SSB Boligkreditt has
entered a framework agreement with Sandnes Sparebank
regarding management, production, IT and financial and risk
management.
There are four Directors.
The Company does not pollute the external environment.
Corporate governance
SSB Boligkreditt AS is a wholly owned subsidiary of
Sandnes Sparebank and has no employees. Please refer to
the Annual Financial Statements of Sandnes Sparebank for
disclosure regarding corporate governance and company
management.
Social responsibility
Please the report in the Annual Financial Statements of the
Parent Bank, Sandnes Sparebank.
Prospects
SSB Boligkreditt has issued covered bonds in the market.
New issues are targeted at the Norwegian market.
The Company expects a modest volume increase in 2014.
In November 2013, bonds issued by SSB Boligkreditt
received a rating upgrade by Fitch. The rating went from AAsubject to an OC level of 12%, to AA subject to an OC level
of 11%. The current rating is expected to be maintained.
Proposal for the allocation of annual profits
Annual profits for 2013 were NOK 55.21 million. The Board
of Directors proposes a group contribution to other companies in the same group of NOK 34.197 million (after taxes).
Remaining earnings of NOK 21.013 million are proposed
transferred to retained earnings,
The Board of Directors considers the operational risk to be low.
The Board of Directors of SSB Boligkreditt AS
March 06, 2014
Odd Egil Flokketveit
Chairman of the Board
Arild Ollestad
Director
Svein Ivar Førland
Director
SSB Boligkreditt årsrapport 2013
Terje Frafjord
Director
Elisabeth Frøyland
Managing Director
Directors report
4 / 33
Statement of income
Income statement (NOK ’000)
Note
2013
2012
Interest and similar income
13
262.921
266.616
Interest and similar costs
13
159.472
200.426
103.449
66.190
Net interest and credit commission income
Commission income and income from banking services
14
963
674
Net change in valuation of financial instruments at fair value
15
-17.200
-4.422
-16.237
-3.748
Total other operating income
Personnel cost
16
41
106
Other operating cost
16
13.156
10.515
Depreciation/writedowns
16,20
Total operating cost
Writedowns and losses on loans and guarantees
9
Ordinary operating profit before taxes
Tax cost
Ordinary profit after taxes
17
589
589
13.785
11.209
-214
558
73.640
50.675
18.430
15.298
55.210
35.377
55.210
35.377
4.197
3.173
Other income and cost (after taxes)
Total profits
Allocation:
Group contribution paid with tax effect (after taxes)
Group contribution paid without tax effect
30.000
Transferred to retained earnings
21.013
32.203
SSB Boligkreditt Annual report 2013
Directors report
5 / 33
Balance sheet
Balance sheet (NOK ’000)
Noter
31.12.2013
31.12.2012
Bank deposits
18,19
123.801
305.592
6,7,8,9,18,19
6.665.482
6.428.822
20
241.698
Net lending to customers
Notes and bonds
Financial derivatives
11,18,19
15.924
20.106
Intangible assets
21
49
638
Deferred tax benefit
17
4.710
18,19
7.861
4.734
7.059.526
6.759.892
5.228.136
Prepaid cost and accrued income
Total assets
Debt securities in issue
18,19,22
4.177.752
Financial derivatives
11,18,19
7.318
10.390
18,23
2.420.335
1.094.123
17
21.956
14.062
18,19
9.451
11.479
6.636.812
6.358.191
227.600
227.600
122.500
122.500
Other liabilities
Taxes payable
Accrued expenses and received, not accrued income
Total liabilities
Share capital
24
Premium
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
72.614
51.601
422.714
401.701
7.059.526
6.759.892
Sandnes, March 06, 2014
Odd Egil Flokketveit
Chairman of the Board
Arild Ollestad
Director
Terje Frafjord
Director
Svein Ivar Førland
Director
Elisabeth Frøyland
Managing Director
SSB Boligkreditt Annual report 2013
Directors report
6 / 33
Equity capital
Equity capital as of 12/31/2011
Capital increase/offering
Share
capital
Premium
Retained
earnings
Total
equity capital
227.600
122.500
19.398
369.498
62.500
37.500
Profit or loss
100.000
9.321
Group contribution paid with tax effect (after taxes)
9.321
-3.173
-3.173
51.601
401.701
Profit or loss
55.210
55.210
Group contribution paid with tax effect (after taxes)
-4.197
-4.197
-30.000
-30.000
72.614
422.714
Equity capital as of 12/31/2012
227.600
122.500
Group contribution paid without tax effect
Equity capital as of 12/31/2013
227.600
122.500
SSB Boligkreditt Annual report 2013
Directors report
7 / 33
Cash flow statement
Cash flow statement (NOK ’000)
2013
2012
257.136
267.813
Cash flow from operations
Lending and funding activities
Payment of interest, commissions and fees from customers
Payment of interest to customers
Interest payments received on securities
3.621
Net payment in/out in connection with trading of financial assets
Operational payables
Taxes
Net cash flow from operations
1.277.186
212.646
-13.614
-4.301
1.524.328
476.159
Cash flow from investment activities
Net payment in/out in connection with trading of interest-bearing securities
-241.842
Net cash flow from investment activities
Cash flow from funding activities
Net payments in/out on instalment loans, lines of credit
-247.850
-102.968
Placement of note and bond debt
-1.247.073
457.960
Repayment of notes and bond debt
-2.302.000
-748.000
-161.500
-203.675
1.464.278
-596.682
-181.792
-120.523
Net interest payments made on funding activities
Net cash flow from funding activities
Net cash flow for the period
Cash and cash equivalents at the beginning of the period
305.593
426.116
Cash and cash equivalents at the end of the period
123.801
305.592
SSB Boligkreditt Annual report 2013
Notes
8 / 33
Note
Note
Note
Note
Note
1General information
2Accounting principles
3Application of estimates
4Balance Sheet Management
5Risk Management
9
9
12
13
14
Credit risk
Note 6Credit risk
Note 7Customer lending
Note 8Loans by geographic region and business sector
Note 9Writedowns and losses on loans
15
17
17
17
Market risk
Note10Interest rate risk
Note11Financial derivatives
18
19
Likviditetsrisiko
Note12Liquidity risk
20
Income statement
Note13Net interest income
Note14Net commission income and income from banking services
Note15Net change in valuation of financial instruments at fair value
Note16Operating cost
Note17Taxes
21
21
22
22
23
Balance sheet
Note18Classification of financial instruments
Note19Fair value of financial instruments
Note20Notes and bonds
Note21Intangible assets
Note22Debt established through the issue of securities
Note23Other liabilities Note24Shareholders’ equity 24
25
28
28
29
29
29
Other information
Note25Events after the date of the balance sheet
Note26Transactions with intimates
30
30
SSB Boligkreditt Annual report 2013
Notes
9 / 33
1
GENERAL INFORMATION
SSB Boligkreditt AS is a wholly owned subsidiary of Sandnes Sparebank. The Company was established to be the Bank’s company for the issue of covered bonds.
SSB Boligkreditt AS offers home mortgage loans when the collateral is within 75 percent of the value of the home. The Company started operations in February 2009.
SSB Boligkreditt is headquartered at Forus, and its office address is Vestre Svanholmen 4.
The 2013 Financial Statements were approved by the Board of Directors on March 06, 2014.
2
ACCOUNTING PRINCIPLES
GENERAL
SSB Boligkreditt AS is part of the Sandnes Sparebank group, which implemented IFRS for their group financial statements as of January 01, 2005.
The corporate financial statements of SSB Boligkreditt AS have been prepared pursuant to §1-5 of the regulation by the Norwegian Ministry of Finance regarding annual
financial statements, which allow simplified application of international accounting standards, hereafter referred to as simplified IFRS. Simplified IFRS entails permission
to recognize provisions for dividends and group contributions from subsidiaries as income and to recognize the Board of Directors’ proposed dividends and group
contributions as liabilities in the balance sheet. According to full IFRS, dividends should be recognized as equity until they have been approved by the Annual General
Meeting. In other respects, simplified IFRS entails that the Company applies the IFRS accounting principles in full.
The measurement basis for the financial statements is historical cost, with the exception of financial derivatives and the financial assets and liabilities that are reported at
fair value with changes in value through the income statement.
All amounts in the financial statements are presented as thousand amounts unless otherwise specifically stated, and Norwegian Kroner is the Company’s presentation
currency.
New standards and interpretations employed as of the 2013 financial year
Amendment of IAS 1 – Presentation of elements of income and cost (OCI)
The amendments of IAS 1 result in the elements presented in the statement of other income and cost (OCI) in total profits shall be grouped on the basis of whether
the items later may be reclassified through the income statement or not. The amendment has an effect on the presentation of the overall profits only.
IFRS 13 – Valuation to fair value
A number of standards require or permit a company to measure or provide information about the fair value of assets, liabilities or equity instruments. IFRS 13 gathers
and clarifies the guidance for how to measure fair value. The standard does not extend the scope of recognition at fair value, but provides guidance regarding
application method where its use is required or permitted by other standards. The amendment does result in more extensive note information, but does not
significantly change the Bank’s income statement or balance sheet.
CURRENCY
The presentation currency is Norwegian Kroner (NOK), which is also the functional currency for the Company.
ACCRUAL OF INCOME
Interest income and interest costs are recognized in the income statement using the yield method. The yield method calculates the amortized cost of loans and
deposits and distributes earned interest or interest expense over the expected term to maturity. The yield is determined by discounting contractual cash flows within
the anticipated term to maturity. The method entails current income accrual of nominal interest with the addition of amortization of up-front fees. If a loan has been
written down due to value impairment, interest income is accrued as the yield on the written down value.
In general, commission income and cost are accrued in line with the provision of a service and are classified as “Commission income and income from banking
services” and ”Commission costs and costs of banking services”, respectively. Fees associated with fixed income instruments are part of the yield calculation and is
correspondingly recognized in the income statement.
BALANCE SHEET RECOGNITION OF ASSETS AND LIABILITIES
The Company recognizes assets at the time when the Company achieves real control of the rights to the assets. Similarly, liabilities are recognized when the Company
assumes real liabilities.
Assets are derecognized at the time when real risk regarding the assets is transferred and the control over the rights to the assets lapses or expires.
SSB Boligkreditt Annual report 2013
Notes
10 / 33
FINANCIAL INSTRUMENTS
Classification of financial instruments
Classification of financial instruments is based on the purpose of their acquisition and the characteristics of the instrument. Financial assets are classified in the
following categories:
• Financial assets at fair value with change in value through the income statement
• Loans and receivables
• Financial instruments available for sale measured at fair value with change in fair value recognized as change in equity
Financial liabilities are classified as:
• Financial liabilities at fair value with change in value through the income statement
• Other financial liabilities measured at amortized cost
Financial assets and liabilities at fair value with change in value through the income statement, include financial derivatives and assets and liabilities it has been decided
to value at fair value.
Assets/liabilities are classified in accordance with FVO when this eliminates or significantly reduces inconsistencies in the measurements or recognition that would
otherwise occur, or if a group is managed and revenues are valued on the basis of fair value in accordance with the Company’s risk management or investment
strategy.
Measurement
Initial recognition
At initial recognition, all financial instruments are measured at fair value on the trading day. Transaction costs that are directly attributable to the establishment of the
asset/liability are included in the cost price of all financial instruments that are not classified at fair value with changes in value through the income statement.
Subsequent valuation
Measurement at fair value
For all financial instruments traded on an active market, the quoted price obtained either from a stock exchange, broker or a pricing agency, is applied. Financial
instruments not traded on an active market are valued with various valuation techniques, and some are valued by professional agencies. All changes in fair value are
recognized directly in the income statement unless the asset is classified as available for sale with change in fair value recognized through change in equity.
The Company has set the fair value of loans with floating rates of interest to correspond to the nominal value, adjusted for the associated writedown. The reason is
that such loans are repriced almost continuously, and that any deviation from the nominal value in an arm’s length transaction between informed and willing parties is
considered insignificant.
Amortized cost valuation
Financial instruments not measured at fair value are valued at amortized cost and income/cost is estimated using the yield method. The yield is determined by
discounting contractual cash flows within the anticipated term to maturity. Amortized cost is the present value of the cash flows discounted by the yield.
Hedge accounting
The Company applies hedge accounting for fair value hedging of some fixed interest funding (bonds). Derivatives related to this funding are earmarked for hedging
purposes. The hedge effect is valued and documented both at initial classification and at each closing of the accounts. In case of fair value hedging, the hedging
instrument is recognized at fair value and the value of the hedging object is adjusted for the change in valuation associated with the hedged risk. Changes in these
values from the starting balance are recognized in the income statement. This method ensures that the presentation in the financial statements of these instruments
complies with the Company’s policies for managing interest rates and actual economic developments. If the hedge is terminated, or if sufficient hedging efficiency
cannot be verified, the change in value of the hedging object is amortized over its remaining maturity.
Writedown of financial assets
On each balance sheet date, we consider whether there is objective evidence of value impairment of financial assets. If there is objective indication of impairment, then
the value of the financial asset is written down, and the writedown is recognized where it belongs according to its character.
Individual writedowns of loans and guarantees
At each balance sheet date an assessment is made whether there is objective evidence of any impairment of the value of an individually assessed loan. The
impairment must be the result of one or more events occurring after the first-time recognition in the balance sheet (a loss event) and it must also be possible to
measure the result of the loss event (or events) reliably. Examples of such events are material financial problems for the debtor, payment default or other breach of
contract. If there is objective proof of the occurrence of impairment of value, the amount of the loss is calculated. In the case of loans carried at amortized cost, the
loss is calculated as the difference between the value recognized in the balance sheet and the present value of estimated future cash flows discounted by the loan’s
original yield. The changes during the period in the valuation of loans are recognized under “Writedowns and losses on loans and guarantees”. For loans carried at fair
value, the change in value represents the difference between the value recognized in the balance sheet and the fair value on the balance sheet date. For these loans,
the change in fair value is reported in the income statement under the item “change in valuation of financial instruments at fair value”.
Losses are considered realized when a voluntary arrangement, insolvency or bankruptcy is confirmed, when attachment proceedings have failed, by an enforceable
judgment, or otherwise if the Company waives all or part of the loan, or if the Company considers the loan to be a loss for the Company.
SSB Boligkreditt Annual report 2013
Notes
11 / 33
Group writedowns of loans
Loans that have not been individually written down for impairment are valued collectively in groups. Writedown is assessed on the basis of developments of the
customers’ risk classification (as described in Note 5) and loss experience for the respective customer groups. In addition, a forward looking macroeconomic review is
performed at year-end in which some segments may be assign increased risk, which in turn will affect the model used. Writedowns are recognized in the period in
which they arise and are included in “write-downs and losses on loans and guarantees” in the income statement.
More details about some types of financial instruments
Loans and receivables
Loans and receivables are financial assets without market quotations. Floating rate loans are valued at amortized cost or at yield to maturity. Fixed rate loans are
recognized at fair value with change in value over the income statement. The interest rate risk in fixed rate loans is controlled with interest rate swaps that are
recognized at fair value. It is the Company’s opinion that valuing fixed rate loans at fair value provides more relevant information about values in the balance sheet.
Financial derivatives
Derivatives are valued at fair value with change in value carried through the income statement. Fair value is valued on the basis of quoted market prices in an active
market, including recent market transactions and various valuation techniques. All derivatives are recognized as assets if the fair value is positive and as liabilities if the
fair value is negative.
Funding and other financial liabilities
Financial liabilities are measured at amortized cost where differences between the received amount less transaction costs and redemption value are distributed over
the term of the loan using the yield method. Interest from other financial liabilities is reported as “interest cost” in income statement.
INTANGIBLE ASSETS
Costs directly associated with major investments in software, which are expected to bring significant financial benefits over time, are recognized as intangible assets.
Cost of purchased licenses is capitalized and straight-line depreciated over their useful economic life, normally five years. Software maintenance costs are accrued as
costs as and when they occur.
At each balance sheet date, all intangible assets are assessed for indications of impairment. If there are indications of impairment, an analysis is made to assess
whether the book value of the intangible assets may be fully recovered. The recoverable amount is the net sales price or the utility value, whichever is higher. The
utility value is calculated by discounting expected future cash flows to present value by applying a discount rate after tax that reflects the market pricing of the time
value of money and the risk related to the specific asset. In the case of assets that generally do not generate independent cash flows, the recoverable amount is
determined for the cash-flow generating entity to which the asset belongs. If the recoverable amount is lower than book value, the value is written down to the
recoverable amount.
INCOME TAX
Tax recognized in the income statement consists of payable tax and deferred tax. Payable tax is the tax calculated on the year’s taxable profits. Deferred tax is
recognized according to the debt method in accordance with IAS 12. Liabilities or assets are calculated on deferred tax on temporary differences, which is the
difference between the book value and the taxable value of assets and liabilities. However, no liability or asset is calculated on the initial recognition items that neither
influence accounting nor taxable profits. An asset is estimated in the event of deferred tax on tax-related losses carried forward. Deferred tax benefits are recognized in
the balance sheet if it is likely that they may be applied against future taxable earnings.
As of 1/1/2014, the tax rate on ordinary income in Norway was changed from 28% to 27%. This has an impact on deferred taxes as of 12/31/2013.
CASH FLOW STATEMENT
The cash flow statements are prepared according to the direct method and the statement shows cash flows grouped according to sources and application areas.
Liquid assets comprise cash and receivables from banks.
Adopted standards and interpretations with effective dates in the future
Only interpretations and standards that are considered relevant for the Company have been included.
IAS 32 – Netting of a financial asset and a financial liability
IAS 32 has been changed to clarify the content of the netting criterion, specifically that one has to have an existing legally enforceable right to net the recognized
amounts, and to clarify that the application of the netting criteria for settlement systems using non-concurrent gross settlement mechanisms. The amendments to
IFRS 32 will become effective January 01, 2014 and have been approved by the EU. The Group plans to apply the standard for accounting periods starting January
01, 2014 and later.
IFRS 9 - Financial instruments
IFRS 9 will replace the current IAS 39. IASB has divided the project into several phases, and as the individual phases of IFRS 9 are completed, the relevant parts of
IAS 39 will be deleted. IFRS 9 replaces the accounting, classification and measurement rules of IAS 39. IFRS 9 reduces the number of measurement categories for
financial assets from four to two, amortized cost and fair value. Financial assets containing ordinary loan terms should be recognized at amortized cost, unless you
elect to record them at fair value, whereas other financial assets should be recognized at fair value. Classification and measurement rules for financial liabilities in IAS
39 are continued, with the exception of financial liabilities valued at fair value through the income statement (the fair value option), where changes in value associated
with own credit risk are separated and recognized as other income and cost. The standard becomes effective for accounting periods starting January 01, 2015 or
later, but it is not yet clear when the standard will be approved by the EU. The Group plans to apply IFRS 9 when the standard becomes effective and has been
approved by the EU, and will evaluate the impact of the new standard during the period up to this point in time.
SSB Boligkreditt Annual report 2013
Notes
12 / 33
3
APPLICATION OF ESTIMATES
The preparation of financial statements in compliance with generally accepted accounting principles in some cases requires the management to make assumptions
and to rely on estimates and discretionary assessments. Estimates and discretionary assessments are evaluated on a current basis, and are based on historical
experiences and assumptions about future events that appear probable on the date of the balance sheet. There is uncertainty associated with the assumptions and
expectations that have been used in estimates and discretionary assessments. Actual results may deviate from the estimates and the assumptions.
WRITEDOWNS OF LOANS AND GUARANTEES
In the case of individually assessed loans and for groups of loans that have been identified as doubtful, a calculation is made to determine a value for the loan or
group of loans. The calculation assumes the use of numbers that are based on judgment, and these affect the quality of the calculated value. Write-down
assessments are performed each quarter.
Individual writedowns
If there is objective proof of impairment of the value of a loan, the loss is calculated as the difference between the balance sheet value and the present value of
estimated future cash flows, discounted by the original yield of the loan. The estimate of future cash flows is made on the basis of experience and discretionary
assessment of probable outcomes for, inter alia, market developments and concrete issues pertaining to each loan, including empirical data regarding the debtor’s
ability to handle a pressured financial situation. In the valuation of writedowns of loans, there is uncertainty related to the identification to be written down, estimate of
timing and amount of future cash flows, as well as the valuation of collateral.
Group writedowns
Loans that are not subject to individual writedowns are part of the calculation of group writedowns of loans. Writedown is calculated on the basis of an assessment of
the development of the customers’ risk classification (as described in Note 5) and loss experience for the respective customer groups. In addition, cyclical and market
developments that have yet to impact the above-mentioned risk classification, are considered in the evaluation of the need for writedowns for customer groups in
aggregate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments that are not traded in an active market, are valued with the use of different valuation techniques. The Company seeks to base
these valuations to the greatest extent possible on the market conditions prevailing on the date of the balance sheet. If there are no empirical market data,
assumptions are made regarding how the market will price the instrument, e.g. based on the pricing of similar instruments. Valuations require extensive use of
discretion, inter alia in the assessment of credit risk, liquidity risk and volatility. A change in one or more of these factors may affect the set value of the instrument. The
fair value of financial instruments is presented in Note 19.
SSB Boligkreditt Annual report 2013
Notes
13 / 33
4
BALANCE SHEET MANAGEMENT
The Company applies the standard method for the calculation of capital requirements.
Net subordinated capital
31.12.13
Equity certificate capital
227 600
227 600
Share premium reserve
122 500
122 500
Other equity
Equity
Deduction for goodwill and other intangible assets
31.12.12
72 614
51 601
422 714
401 701
-4 759
-638
Total tier 1 capital
417 956
401 063
Net subordinated capital
417 956
401 063
2 634 362
2 586 312
111 738
72 638
Risk-weighted assets:
Credit risk - standard method
Operational risk
Deductions
-3 460
-4 245
2 742 640
2 654 705
Capital adequacy ratio
15,2
15,1
Tier 1 capital ratio
15,2
15,1
Core Tier 1 capital ratio
15,2
15,1
Specification of calculation base
2013
2012
Institutions
29 065
66 107
Companies
12
Total risk-weighted assets
Standard Method
Loans secured by real estate
Covered bonds
Others
Credit risk
Operational risk
2 527 249
2 472 522
24 271
53 765
47 684
2 634 362
2 586 313
111 738
72 638
Witedowns of group of loans
-3 460
-4 245
Deduction
-3 460
-4 245
2 742 639
2 654 705
Total calculation base
The main objective of SSB Boligkreditt is to ensure the Sandnes Sparebank group access to satisfactory funding. This is effected through the issue of covered bonds
(OMF).
The Company has an internal capitalization policy which requires a core Tier-1 capital ratio of at least 15%, calculated on the basis of the Standard method. The
adopted capitalization policy shall contribute to the Company having equity capital of a sufficient size to enable effective use of equity relative to the scope and risk
profile of the business. Access to liquidity shall be the dominant consideration with respect to the goal of achieving competitive returns on equity. The equity capital
shall also ensure that the Company will have sufficient capital buffers to withstand periods with losses.
The capitalization of the Company is closely tied to the size of the portfolio of loans transferred to the Company. Limits have been set for the size of the portfolio
relative to the loan portfolio of Sandnes Sparebank.
The limit is a total loan portfolio corresponding to the lower of:
• 30% of the total loan portfolio of Sandnes Sparebank (group) and
• 45% of total retail loans of Sandnes Sparebank.
SSB Boligkreditt Annual report 2013
Notes
14 / 33
5
RISK MANAGEMENT
The Board of Directors of SSB Boligkreditt AS puts great store in risk management through the identification, measurement and management of the different risks to
which the Company may be exposed. This maintains the confidence in SSB Boligkreditt AS that it is necessary to have in the market. SSB Boligkreditt AS shall have a
low risk profile.
ORGANIZATION AND AUTHORIZATION STRUCTURE
Board of Directors
The Board of Directors of SSB Boligkreditt AS is the Company’s highest governing body with respect to risk and control. The Board of Directors is also responsible for
ensuring that the Company has adequate equity relative to the risk and scope of the Company’s operations, and for ensuring compliance with statutory capital
adequacy requirements.
The Board of Directors determines the overall objectives, such as risk profile, required rates of return and capital levels. The Board of Directors also determines the
framework and authorizations within the different risk areas. Guidelines for the Company’s risk management is also the responsibility of the Board of Directors.
Managing Director
The Managing Director has the daily responsibility for risk management. This means that the Managing Director is responsible for implementing effective risk
management systems, and ensuring that risk exposures are monitored and reported in a satisfactory manner.
Risk management
SSB Boligkreditt AS does not have a separate risk management unit, but is utilizing the resources of Sandnes Sparebank. This also ensures the necessary autonomy.
Credit risk
Credit risk is defined as the risk of loss due to customers and other counterparties becoming unable to pay at the agreed time and according to written agreements,
and due to collateral received not covering outstanding claims. The operating framework of the Company has defined limits for which loans that should be included in
the loan portfolio of SSB Boligkreditt and sets the requirements for both borrowers and collateral. The Company is using a classification system that only allows the
best risk classes to be part of the Company’s body of collateral.
As of 12/31/2013, the Company had a portfolio of home mortgages of NOK 6.7 billion, with an average loan to asset value ratio of 51%. The Board of Directors
considers the quality of the portfolio to be very good, which also entails low credit risk.
Liquidity and settlement risk
Liquidity risk is defined as the risk of the Company not being able to fulfil its obligations and/or finance an increase in assets without extra costs arising in the form of
price reduction for assets that have to be realized, or in the form of extra expensive funding. Liquidity risk is managed through limits set by the Board of Directors.
Market risk
Market risk is defined as risk of loss of market values of portfolios of financial instruments, due to fluctuations in share prices, currency exchange rates, interest rates
and commodity prices. SSB Boligkreditt AS is not exposed to currency or equity instruments. Limits have been set for interest risk exposure.
Interest rate risk
Interest rate risk is the risk of loss arising due to changes in interest rate levels. The risk arises primarily from fixed-rate loans and funding by fixed income securities.
The Company measures interest rate risk as the profit effect of a parallel shift in the yield curve. The risk of non-parallel shifts is covered through limitations on
maximum exposure.
The main principle of the Company’s interest rate risk management is to neutralize the interest rate risk by matching the Company’s assets and liabilities. The
Company is constantly monitoring its interest rate exposure. Interest rate exposure is measured at 3 month intervals from 0-10 years.
Operational risk
Operational risk is defined as the risk of loss due to insufficient or deficient internal processes, human errors and system faults, or external events.
Guidelines have been prepared for the reporting of undesirable events.
SSB Boligkreditt Annual report 2013
Notes
15 / 33
Credit risk
6
CREDIT RISK
Maximum exposure to credit risk
2013
2012
123.801
305.592
Loans to customers
6.665.482
6.428.822
Financial derivatives
15.924
20.106
Cash and bank deposits
Prepaid cost and accrued income
7.861
4.734
Total credit risk exposure in balance sheet items
6.813.069
6.759.254
Unused credit facilities and loan grants
1.033.308
1.232.465
Total credit exposure
7.846.377
7.991.719
As of 12/31/2013, the Company had a portfolio of home loans valued at NOK 6.7 billion. At the same point in time, no loans were in default. The quality of the loan
portfolio is considered to be very good, and the credit risk as low.
Score card models are used as part of the quantification of credit risk. These models calculate the customer’s probability of default (PD) over the next 12 months.
SSB Boligkreditt AS uses the same models as Sandnes Sparebank. The models were validated in the autumn of 2010 with satisfactory results.
In RM, the Bank is now using two models, application score and behaviour score. The application score is only used when a customer is applying for a loan, whereas
the behavioural score is applied monthly. The behavioural score is used in the follow-up of established customers. Monthly classifications enable tracking of portfolio
quality, and to identify customers that are down-classified as early as possible, making it possible to implement measures before the customer defaults.
The below table shows the intervals for the different risk classes, on the basis of default.
Default class
PD lower limit
PD upper limit
A
0,00 %
0,10 %
B
0,10 %
0,25 %
C
0,25 %
0,50 %
D
0,50 %
0,75 %
E
0,75 %
1,25 %
F
1,25 %
2,00 %
G
2,00 %
3,00 %
H
3,00 %
5,00 %
I
5,00 %
8,00 %
J
8,00 %
100 %
Defaults and written-down
100 %
100 %
SSB Boligkreditt AS is pricing its loans on the basis of their risk exposure. The loans with the highest risk have the highest price. The combination of probability of
default and collateral coverage forms the basis for 5 risk categories (excluding non-performing and written down loans):
Risk category
Expected losses lower limit
Expected losses upper limit
Lowest
0,00 %
0,05 %
Low
0,05 %
0,35 %
Medium
0,35%
1,50%
High
1,50 %
2,50 %
Highest
2,50 %
100,00 %
SSB Boligkreditt Annual report 2013
Notes
16 / 33
Total loans by risk groups as of 12/31. 2013
Risk classes
Lowest
Loans to
customers
Guarantees
Unused limit
5.717.852
1.002.999
Low
827.772
Medium
108.244
Total loans and
advances
Percentage
6.720.851
87,3 %
29.620
857.392
11,1 %
689
108.933
1,4 %
High
6.021
6.021
0,1 %
Highest
5.815
5.815
0,1 %
7.699.012
100,0 %
Default/writedowns
Total
6.665.704
1.033.308
Total loans by risk groups as of 12/31/2012
Risk classes
Lowest
Loans to
customers
Guarantees
Unused limit
Total loans and
advances
Percentage
5.626.604
1.190.016
6.816.620
Low
632.031
33.468
665.499
8,7 %
Medium
174.173
8.981
183.154
2,4 %
High
Highest
88,9 %
0,0 %
259
259
0,0 %
7.665.532
100,0 %
Overdue, not written-down loans and advances
2013
2012
30-59 days
5.598
6.438
60-89 days
1.935
Default/writedowns
Total
0,0 %
6.433.067
1.232.465
Age distribution, overdue but not written down loans
The table shows overdue amounts on loans and overdrafts of credits/deposits distributed on the number of days overdue.
More than 90 days
Total overdue, not written-down loans and advances
7.534
6.438
SSB Boligkreditt Annual report 2013
Notes
17 / 33
7
CUSTOMER LENDING
Loans to customers
2013
Loans to customers, at fair value
2012
387.281
362.606
Loans to customers, at amortized cost
6.278.201
6.066.216
Net lending to customers
6.665.482
6.428.822
Loans
Unused credit
facilities
8
LOANS BY GEOGRAPHIC REGION AND BUSINESS SECTOR
Loans
By geography
Unused credit
facilities
2013
2013
2012
2012
5.664.785
888.444
5.288.132
1.061.908
Oslo/Akershus
611.355
89.588
735.983
116.035
Other counties
309.150
44.087
359.303
46.104
83.653
11.189
49.648
8.418
6.668.943
1.033.308
6.433.066
1.232.465
Rogaland
Abroad
Gross loans to customers
By business sector
Retail customers and others
Group writedowns
2013
2013
2012
2012
6.668.943
1.033.308
6.433.066
1.232.465
-3.460
Net lending to customers
6.428.822
1.232.465
Losses on loans and guarantees
2013
2012
Change in group writedowns during the period
-214
558
Losses on loans and guarantees
-214
558
9
6.665.482
-4.245
1.033.308
WRITEDOWNS AND LOSSES ON LOANS
Upon the purchase of loan portfolio from Sandnes Sparebank, group writedowns are assumed.
Group writedowns at the start of the period
- Transferred from Sandnes Sparebank on the sale of loan portfolio
4.245
5.366
-571
-1.679
+ Increase in group writedowns
-214
558
Group writedowns as of 31/12
3.460
4.245
SSB Boligkreditt Annual report 2013
Notes
18 / 33
Market risk
10
INTEREST RATE RISK
SSB Boligkreditt is not exposed to currency exchange risk or equity instrument risk. Thus, market risk only arises due to open holdings on the fixed income market.
The risk is related to loss of earnings due to interest rate fluctuations.
Interest rate risk is related to negative earnings impacts due to market rate fluctuations. Primarily, the balance sheet of SSB Boligkreditt consists of loans to the retail
market with a floating rate of interest, and funding in the form of covered bonds. As of 12/31/2013, the Company has issued bonds with a nominal value of NOK 4.3
billion, of which NOK 3.7 billion carry a floating rate.
Time to repricing date (gap) for
assets and liabilities
Up to 1
month
Cash
123 801
Loans to customers
Notes and bonds
1-3
months
3 months
- 1 year
1-5 years
More than
5 years
6 288 457
18 711
120 000
121 698
51 677
217 068
89 569
15 325
599
Debt in relation to issued securities
Other Liabilities
6 532 258
140 409
675 000
3 502 752
64
520
6 665 482
241 698
Other assets
Financial derivatives
2013
123 801
Financial derivatives
Total assets
No interest
exposure
51 677
232 393
2 902
3 832
90 168
15 924
12 620
12 620
12 620
7 059 526
4 177 752
7 318
2 451 741
2 451 741
Total liabilites and equity capital
3 126 805
3 503 272
2 902
3 832
Net liquidity exposure, balanse sheet items
3 405 453
-3 362 863
48 775
228 561
90 168
12 620
6 636 812
422 714
3 405 453
-3 362 863
48 775
228 561
90 168
12 620
422 714
1-3
months
3 months
- 1 year
1-5 years
More than
5 years
No interest
exposure
2013
13 012
48 002
217 068
67 742
Receipts / disbursements off balance derivatives
Net total all items
0
NOK 0 (Loans to customers) in column ”No interest exposure”, is related to writedowns.
Time to repricing date (gap) for
assets and liabilities
Cash
Loans to customers
Up to 1
month
305 592
6 082 997
305 592
6 428 822
Notes and bonds
Financial derivatives
20 106
20 106
Other assets
Total assets
Debt in relation to issued securities
Financial derivatives
Other Liabilities
6 388 589
13 012
700 000
4 528 136
270
48 002
237 174
3 940
6 180
67 742
5 372
5 372
5 372
6 759 892
5 228 136
10 390
1 119 664
1 119 664
Total liabilites and equity capital
1 819 934
4 528 136
3 940
6 180
Net liquidity exposure, balanse sheet items
4 568 655
-4 515 124
44 062
230 994
67 742
5 372
6 358 191
401 701
4 568 655
-4 515 124
44 062
230 994
67 742
5 372
401 701
Receipts / disbursements off balance derivatives
Net total all items
Interest rate sensitivity
The value of on- and off-balance sheet items is affected by changes in interest rates. The table below shows the potential gain(+)/loss (-) for the Bank of a parallel
positive shift of the yield curve of one percentage points. As of December 31, 2013, a parallel interest rate increase of two percentage points would have resulted in a
loss of NOK 1.4 million, whereas a parallel interest rate decline of two percentage points would have resulted in a gain of NOK 1.4 million. The Company’s interest rate
risk is considered to be low.
SSB Boligkreditt Annual report 2013
Notes
19 / 33
11
FINANCIAL DERIVATIVES
Interest rate related instruments are used to minimize interest rate risk on the Company’s loans to customers. The Company has swapped fixed rate lending and fixed
rate funding.
The Board of Directors has adopted limits for the Company’s exposure vis-à-vis all counterparties in order to reduce the settlement risk related to the use of financial
instruments.
Fair value as of 12/31/2013
2013
Virkelig verdi per 31.12.2012
2012
Contractual
amount
Positive
market value
Negative
market value
Contractual
amount
Positive
market value
Negative
market value
Interest rate agreements *
955.000
15.924
7.318
885.000
20.106
10.390
Total financial derivatives
955.000
15.924
7.318
885.000
20.106
10.390
* Of which used for hedging purposes
525.000
15.243
525.000
20.106
SSB Boligkreditt Annual report 2013
Notes
20 / 33
Likviditetsrisiko
12
LIQUIDITY RISK
Liquidity risk entails that the Company is not able to refinance its debt as it matures, or unable to finance increases in its assets. The valuation of the Company’s
liquidity risk is based on a consideration of the Company’s balance sheet structure, including the Company’s dependence on funding and the additional cost related to
having to obtain long maturity funding in the money market, compared to funding with shorter final maturities.
The mortgage company is covering its funding needs through the issue of covered bonds (OMF). Other financing needs are covered by short-term debt to the Parent
Company.
Remaining period to
maturity, main items
Up to 1
month
1-3
months
3 months
- 1 year
Debt securities in issue
1-5
years
More than
5 years
3.866.000
300.000
Other liabilities
No residual
maturity
Total
2013
4.166.000
2.451.741
2.451.741
300.000
2.451.741
6.625.059
More than
5 years
No residual
maturity
Total
2012
Financial derivatives, gross settlement
64
520
2.902
3.832
Total disbursements
64
520
2.902
3.869.832
Remaining period to
maturity, main items
Up to 1
month
1-3
months
3 months
- 1 year
1-5
years
283.000
4.927.000
270
3.940
6.180
10.390
1.119.934
286.940
4.933.180
6.340.054
Debt securities in issue
Other liabilities
Financial derivatives, gross settlement
Total disbursements
1.119.664
7.318
5.210.000
1.119.664
As of 12/31/2013, the liquidity risk is assumed to be low.
SSB Boligkreditt Annual report 2013
Notes
21 / 33
Income statement
13
NET INTEREST INCOME
Interest income from bank deposits, valued at amortized cost
Interest income on loans to customers, valued at fair value
Interest income on loans to credit institutions, valued at amortized cost
Interest on securities, valued at fair value
Interest income
2013
2012
1.588
4.749
11.321
13.273
245.354
248.594
4.658
262.921
266.616
43.393
21.463
116.079
178.962
Interest cost
159.472
200.426
Net interest income
103.449
66.190
2013
2012
Interest cost on debt to credit institutions, valued at amortized cost
Interest cost on issued securities, valued at amortized cost
Other interest cost, valued at amortized cost
14
NET COMMISSION INCOME AND INCOME FROM BANKING SERVICES
Payment services
1
Other fees
963
673
Commission income and income from banking services
963
674
963
674
Commission costs and costs of banking services
Net commission income and income from banking services
SSB Boligkreditt Annual report 2013
Notes
22 / 33
15
NET CHANGE IN VALUATION OF FINANCIAL INSTRUMENTS AT FAIR VALUE
Net change in valuation of financial instruments at fair value
Net change in valuation of notes and bonds
Gains/losses, redemption of own bonds
Net change in valuation of currency and financial derivatives
Net change in valuation of loans at fair value
Net change in valuation of financial derivatives, hedging
Net change in valuation of hedged financial liabilities
2013
2012
-24
-9.527
3.754
-4.140
-11.403
-283
-4.786
7.250
4.786
-7.250
-17.200
-4.422
2013
2012
Salary
41
106
Personnel cost
41
106
Audit fee
149
38
Other audit related services
200
65
Net gains on valuation of financial instruments at fair value
16
OPERATING COST
Operating cost
Other assistance
Total auditors' fees, incl. VAT
Management fee
Other administrative costs
Consultancy fees
30
379
103
9.624
9.245
675
607
1.863
9
614
551
13.156
10.515
Depreciation
589
589
Total depreciation and writedowns
589
589
13.785
11.209
Other operating cost
Total other operating costs
Total operating cost
In 2013, there were no employees of SSB Boligkreditt AS. The General Manager is paid by the Parent Company and his services charged to the mortgage company
through the management fee. NOK 30.000 have been disbursed for the payment of fees.
The management fee is related to an agreement with Sandnes Sparebank regarding the purchase of services for the management of the loan portfolio and other
administrative functions.
SSB Boligkreditt Annual report 2013
Notes
23 / 33
17
TAXES
Tax on profits
2013
2012
Taxes payable
23.588
15.296
-448
3
Correction of prior years’ tax cost
Deferred taxes
Impacts of changed taxation rules
Total tax on ordinary profit
Reconciliation of tax cost against profit before taxes
-4.884
174
18.430
15.298
2013
2012
Profit before taxes
73.640
50.675
28% of pre-tax profit
20.619
14.192
Permanent differences
Change in deferred taxes
18
-1.933
1.104
Correction of prior years’ tax cost
-448
3
Impacts of changed taxation rules
174
Total tax on ordinary profit
Effective tax rate
Basis for taxes payable in the balance sheet
Profit before taxes
18.430
15.298
25 %
30 %
2013
2012
73.640
50.675
Group contribution
-5.829
-4.404
Basis for taxes payable
67.811
46.271
28% on the basis of taxes payable
19.005
12.956
Change in deferred taxes
2.950
Off balance sheet deferred tax benefit
Taxes payable in the balance sheet
1.104
21.956
14.062
SSB Boligkreditt Annual report 2013
Notes
24 / 33
Balance sheet
18
CLASSIFICATION OF FINANCIAL INSTRUMENTS
Financial instruments at fair value through the income statement
Assets
Cash and deposits
Loans to customers
Financial assets
and liabilities valued
at amortized cost
Trading
portfolio
Financial derivatives
as hedging
instruments
682
387 281
6 665 482
241 698
241 698
15 243
15 924
7 861
7 861
Other assets
6 409 864
Total
123 801
6 278 201
Financial derivatives
Total assets
Non-financial
assets and
liabilities
123 801
Notes and bonds
Accrued income
Decided
recognized
at fair value
31.12.13
682
15 243
628 979
4 759
4 759
4 759
7 059 526
Liabilities
Debt in relation to issued securities
4 177 752
Financial derivatives
Accrued cost
Other liabilities
4 177 752
7 318
7 318
9 451
9 451
2 420 335
2 420 335
Accruals
Total liabilities
Assets
Cash and deposits
Loans to customers
6 607 538
Financial assets
and liabilities valued
at amortized cost
21 956
21 956
21 956
6 636 812
Financial instruments at fair value through the income statement
31.12.12
7 318
Trading
portfolio
Financial derivatives
as hedging
instruments
Decided
recognized
at fair value
Non-financial
assets and
liabilities
305 592
Total
305 592
6 066 216
362 606
6 428 822
Notes and bonds
Financial derivatives
Accrued income
20 106
20 106
4 734
4 734
Other assets
Total assets
6 376 542
20 106
362 606
638
638
638
6 759 892
Liabilities
Debt in relation to issued securities
5 228 136
Financial derivatives
Accrued cost
Other liabilities
5 228 136
10 390
11 479
1 094 123
1 094 123
Accruals
Total liabilities
10 390
11 479
6 333 739
10 390
14 062
14 062
14 062
6 358 191
SSB Boligkreditt Annual report 2013
Notes
25 / 33
19
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value of financial instruments valued at amortized cost
Assets
Cash and bank deposits
2013
2013
2012
2012
Book value
Fair value
Book value
Fair value
123.801
123.801
305.592
305.592
6.665.482
6.665.482
6.428.822
6.428.822
7.861
7.861
4.734
4.734
Total assets
6.797.145
6.797.145
6.739.148
6.739.148
Debt established through the issue of securities
4.177.752
4.211.537
5.228.136
5.263.561
9.451
9.451
11.479
11.479
4.187.204
4.220.988
5.239.616
5.275.040
Loans to customers
Prepaid cost and accrued income
Accrued expenses and received, not accrued income
Total liabilities
With respect to financial instruments of short duration (less than three months), book value is assumed to represent fair value.
Loans to customers valued at amortized cost, include floating rate loans. Floating rate loans are adjusted for changes to the market interest rate and for changes in
the credit risk. Consequently, the Company measures the fair value of these loans as being approximately equal to the book value. Loans that do not satisfy this
current repricing condition, are individually valued at fair value on the date of the balance sheet. Any excess or inferior values arising within any change of interest rate
period are not considered to represent material for the Company.
Financial instruments valued at fair value
The Company uses the following valuation hierarchy in the calculation of the fair value of financial instruments:
Level 1 – Quoted prices in an active market for the relevant asset or liability
Level 2 – Quoted prices in an active market for similar assets or liabilities, or another valuation method where all significant input is based on empirical market data.
Level 3 – Valuation techniques that are mainly not based on empirical market data.
Determination of fair value at the end of the period pursuant to the valuation hierarchy
Level 1
Level 2
Level 3
31.12.13
Financial instruments at fair value through the income statement
Loans to customers
Notes and bonds
387 281
241 698
Financial derivatives
Financial derivatives, hedging instrument
Total
241 698
387 281
241 698
682
682
15 243
15 243
15 924
387 281
644 904
Financial instruments at fair value through the income statement
Financial derivatives
7 318
7 318
7 318
7 318
Financial derivatives, hedging instrument
Total
SSB Boligkreditt Annual report 2013
Notes
26 / 33
Amortized cost at the end of the period persuant to the valuation hierarchy
Level 1
Level 2
Level 3
31.12.2013
Financial assets valued at amortized cost
Cash and deposits
Loans to customers
Accrued income
Total
0
123 801
123 801
6 278 201
6 278 201
7 861
7 861
6 409 864
0
6 409 864
Financial liabilities valued at amortized cost
Securities debt
Accrued cost
Other liabilities
4 177 752
4 177 752
9 451
9 451
2 420 335
Total
2 420 335
0
6 607 538
0
6 607 538
Level 1
Level 2
Level 3
31.12.12
362 606
362 606
Determination of fair value at the end of the period pursuant to the valuation hierarchy
Financial instruments at fair value through the income statement
Loans to customers
Notes and bonds
Financial derivatives
Financial derivatives, hedging instrument
20 106
Total
20 106
20 106
362 606
382 712
Financial instruments at fair value through the income statement
Financial derivatives
10 390
10 390
10 390
10 390
Financial derivatives, hedging instrument
Total
Amortized cost at the end of the period persuant to the valuation hierarchy
Level 1
Level 2
Level 3
31.12.2012
Financial assets valued at amortized cost
Cash and deposits
Loans to customers
Accrued income
Total
305 592
305 592
6 079 645
6 079 645
10 691
0
6 395 929
10 691
0
6 395 929
Financial liabilities valued at amortized cost
Securities debt
5 228 136
Accrued cost
Other liabilities
Total
0
5 228 136
11 479
11 479
1 094 123
1 094 123
6 333 739
0
6 333 739
SSB Boligkreditt Annual report 2013
Notes
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Reconciliations of movements from Level 3 from 31.12.2012 til 31.12.2013
Loans
Available for sale
Deposits
Total
Balance as of 31.12.2012
362 606
362 606
Recognized profit/loss in the current income statement
-11 403
-11 403
94 817
94 817
-58 739
-58 739
Recognized profit/losss in other income
Purchase
Issued
Settlement
Migration to level 2/1
Balance as of 31.12.2013
387 281
0
0
387 281
Please see below for a description of how fair value is calculated for financial instruments on level 2 and 3, i.e. where a valuation technique has been applied.
Financial instruments classified on level 2
Financial derivatives
Financial derivatives are valued at market value on the basis of information collected from the seller of the financial derivative. The market value is calculated on the
basis of the middle price determined by each brokerage on the basis of relevant market prices at the time of the report.
Financial instruments classified on level 3
Loans to customers
Fixed rate loans to customers are valued on the basis of the agreed cash flow from the loans, discounted by the yield. The yield is based on the prevailing market
terms on the date of the balance sheet, adjusted for margin requirements. The condition for the calculation of margin requirements is based on an assessment of what
an external investor would have assumed for an investment in a similar portfolio.
Customer loans subject to writedowns are valued on the basis of probable cash flow from the loans, discounted by the yield, adjusted for market terms for similar not
written-down loans.
The year’s increase is wholly related to the takeover of loans from the Parent Company, Sandnes Sparebank.
SSB Boligkreditt Annual report 2013
Notes
28 / 33
20
NOTES AND BONDS
Notes and bonds at fair value
2013
Notes
0
Bonds (OMF)
241.698
Subordinated loan, bond issue
Total notes and bonds at fair value
0
241.698
0
2,37 %
0.00%
3,61
0.00
Of which government-guaranteed notes/bonds
Yield
Duration
0
0
Fixed income funds
21
2012
0
INTANGIBLE ASSETS
Book value as of 1/1/2012
1.227
Additions
Depreciation
589
Book value as of 12/31/2012
638
Original acquisition cost
2.944
Total depreciation and amortization
2.895
Book value as of 1/1/2013
638
Additions
Depreciation
Book value as of 12/31/2013
589
49
Original acquisition cost
2.944
Total depreciation and amortization
2.895
Book value as of 12/31/2013
Useful life
49
5 år
The addition of immaterial assets applies to the development of IT applications related to SSB Boligkreditt AS
SSB Boligkreditt Annual report 2013
Notes
29 / 33
22
DEBT ESTABLISHED THROUGH THE ISSUE OF SECURITIES
Bond issues, discounts deducted
Bond issues, own holdings
Total debt established through the issue of securities
Average interest rate on bond issues:
2013
2012
4.261.752
5.270.136
84.000
42.000
4.177.752
5.228.136
2,44 %
3,01%
As of 12/31/2013, SSB Boligkreditt has issued 7 bonds.
Change in securities debt
Balance as of 31.12.2012
Issued
Matured/redeemed
5 210 000
1 300 000
2 302 000
Bond debt, nominal value
Valutaion adjustments
Total debt securities in issue
Bonds
Other changes Balance as of 31.12.2013
18 136
4 208 000
-6 384
11 752
5 228 136
4 219 752
Face value
Final due date
NO0010588874
525.000
18.02.2015
NO0010636335
500.000
08.02.2017
NO0010492473
700.000
22.06.2015
NO0010577166
700.000
15.04.2016
NO0010601099
525.000
25.02.2015
NO0010689664
1.000.000
20.09.2018
NO0010697691
300.000
04.12.2019
23
OTHER LIABILITIES
Debt to Sandnes Sparebank
Other liabilities
Payable to group companies
Other liabilities
2013
2012
2.414.504
1.089.520
1
196
5.829
4.407
2.420.335
1.094.123
SSB Boligkreditt paid 3 month NIBOR + 0.7% as interest on the debt to the Parent Company.
The debt to the Parent Company of NOK 2,215 (1,090) million is related to temporary financing of SSB Boligkreditt’s purchase of the loan portfolio from the Parent
Company.
24
SHAREHOLDERS’ EQUITY
The share capital of SSB Boligkreditt AS is NOK 227,600,000 divided on 2,276,000 shares, each with a nominal value of NOK 100. Each share gives the same voting
right in the Company. All shares are owned by Sandnes Sparebank.
SSB Boligkreditt Annual report 2013
Notes
30 / 33
Other information
25
EVENTS AFTER THE DATE OF THE BALANCE SHEET
There have been no particular events after the date of the balance sheet that affects the financial statements as of 12/31/2013.
26
TRANSACTIONS WITH INTIMATES
SSB Boligkreditt AS is a wholly owned subsidiary of Sandnes Sparebank. Transactions between the Company and the Parent Bank are effected according to normal
commercial terms and principles.
Summary of intergroup transactions:
Income statement
2013
2012
Deposit interest
1.125
4.749
-71.975
-125.871
-9.624
-9.245
Interest and credit commissions paid
Management fee
Balance sheet
Bank deposits
Other liabilities
Debt established through the issue of securities
23.801
305.592
2.420.333
1.093.927
349.804
2.006.944
SSB Boligkreditt Annual report 2013
Directors report
31 / 33
SSB Boligkreditt Annual report 2013
Directors report
32 / 33
SSB Boligkreditt Annual report 2013
Audit Committee’s Report
33 / 33
The Audit Committee’s Report for 2013
The Audit Committee has performed its control function in accordance with the Norwegian
Savings Banks Act and given instructions for the Committee.
SSB Boligkreditt’s operations in 2013 were conducted in accordance with the Norwegian
Savings Banks Act, the SSB Boligkreditt’s Articles of Association and other provisions
SSB Boligkreditt is obliged to observe.
The financial statements for 2013, the annual report and the recommended allocation of net
profit have been prepared and presented in accordance with the Norwegian Savings Banks
Act, the Norwegian Accounting Act and the relevant regulations.
The Audit Committee recommends that the financial statements presented be adopted as the
SSB Boligkreditt's accounts for the 2013 financial year.
Sandnes, 14 March 2014
Chairman
Deputy Chairman
SSB Boligkreditt Annual report 2013