Third quarter (Unaudited) Skandiabanken Boligkreditt AS

Transcription

1 Q3 Third quarter 2017 (Unaudited) Skandiabanken Boligkreditt AS

2 Key figures In NOK thousand Reference Jan- Sep 17 Jan- Sep Summary of income statement Net interest income Net other income Total income Other operating expenses Operating profit before loan losses Loan losses Profit before tax Tax expense Net profit Balance sheet figures (in million NOK) Total loan volume Covered bonds issued (nominal value) Covered bonds issued (carried value) Total assets, end of period Losses and defaults Loss rate (%) % % % Solvency 4 Common equity Tier 1 ratio 16.7 % 14.4 % 14.2 % Tier 1 capital ratio 17.9 % 16.2 % 16.0 % Total capital ratio 19.7 % 18.7 % 18.5 % Leverage ratio 6.4 % 5.6 % 5.8 % Other Loan to value % 48.7 % 49.2 % Cover Pool Over-collateralisation (OC), (nominal) 14.2 % 21.5 % 19.0 % Alternative Performance Measures / References: Skandiabanken Boligkreditt AS (the company) discloses alternative performance measures as a supplement to the financial statements prepared in accordance with IFRS. Such performance measures are commonly used by analysts, investors and other stakeholders to evaluate the performance of the company in isolation or relative to the financial industry. The measures are provided to give an enhanced insight into the operations, financing and future prospects of the company. Some of the measures are presented in detail in notes to the financial statement and not repeated here. 1) Loss rate is calculated as the loan losses of the period divided by the average loan volume of the period. The measure is commonly used by banks and industry analysts to indicate the performance and quality of the lending book. For interim periods the loan losses for the period is annualised using the number of days in the period to the total number of days in the year. 2) LTV (Loan-to-Value) is calculated as the loan amount divided by the estimated value of the property. When calculating a weighted average of LTV for the entire loan book, the credit balance of home loans is used as weights. The LTV is provided as a measure of lending risk exposure. 3) Cover pool consist of mortgages and supplementary assets eligible according to the covered bonds legislation in Norway. Please refer to note 9 for further detail. 4) Solvency figures are presented including profit for the period. Please refer to note 3 for further detail. PAGE 2/24 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

3 Third Quarter Results Skandiabanken Boligkreditt AS had a net profit of NOK 40.5 (22.6) million in the third quarter of 2017, which is an increase of NOK 7.7 million from the second quarter of At the end of the quarter, net customer loans amounted to NOK 27.2 (18.2) billion, up from NOK 24.9 billion at the end of the second quarter of Outstanding covered bonds amounted to NOK 24.0 (16.2) billion. The average loan to value (LTV) was 49.8 (48.7) per cent. Skandiabanken Boligkreditt AS ( Skandiabanken Boligkreditt or the company ) is a vehicle to fund the Skandiabanken group by issuing covered bonds based on residential mortgages. The company s offices are located in Bergen, Norway. All comparable figures refer to the corresponding period previous year unless otherwise stated. Important events during the quarter The average Norwegian short-term money market rates continued to decrease in the third quarter of 2017, while Norges Bank decided to keep its key policy rate stable at 0.5 per cent at both the September and October meetings. Skandiabanken Boligkreditt increased its lending rate for home loans with 0.15 per cent in the quarter, effective from 14 august Operating income Operating income amounted to NOK 56.3 (31.3) million, compared to NOK 45.0 million in the second quarter of Net interest income increased to NOK 56.3 (31.8) million. There was no other income in the quarter. Operating expenses Operating expenses amounted to NOK 3.8 (1.9) million in the quarter and consisted mainly of administrative expenses related to the company s hire of management and administrative resources from Skandiabanken ASA and expenses related to the establishment of a Euro Medium Term Note (EMTN) programme for long-term funding. Impairments and losses Loan losses amounted to NOK 0.1 (0.1) million at quarter end. At the end of the quarter, total write-downs were NOK 1.6 (1.4) million. Taxes The calculated income tax expense was NOK 12.2 (6.9) million, which corresponds to an effective tax rate of 23.1 (23.5) per cent. Loans to customers Loans to customers increased to NOK 27.2 (18.2) billion, representing a net increase of NOK 2.3 billion from the previous quarter. Capitalisation, liquidity and financial position Skandiabanken Boligkreditt had total booked equity of NOK 1.8 billion as of 30 September 2017, equivalent to a common equity Tier 1 capital ratio of 16.7 per cent. At quarter end the Tier 1 capital ratio was 17.9 per cent and the total capital ratio 19.7 per cent. The capital ratios include retained earnings from the first nine months of As of 30 September 2017, the company had a leverage ratio of 6.4 per cent, well above the regulatory requirement of three per cent. Skandiabanken Boligkreditt had NOK 24.0 (16.2) billion in outstanding debt issued as covered bonds as of 30 September A total of NOK 1.5 billion in covered bonds were issued during the quarter. Securities totalling NOK 0.1 billion were redeemed during the quarter. At quarter end, Skandiabanken Boligkreditt had total liquid assets of NOK 0.4 (1.5) billion. The liquidity coverage ratio (LCR) was 549 per cent, significantly above the regulatory minimum. Covered bonds issued by Skandiabanken Boligkreditt have been assigned the highest rating from Moody s Investors Service (Aaa). Comments on results for the first nine months of 2017 Skandiabanken Boligkreditt made a net profit of NOK 96.7 million in the first nine months of 2017, compared with NOK 67.0 million in the first nine months of Net interest income amounted to NOK (94.0) million. Operating expenses amounted to NOK 8.1 million, compared with NOK 6.1 million in the first nine months of Loan losses for the first nine months of 2017 amounted to NOK 0.1 (0.1) million. Subsequent events At an extraordinary general meeting of Skandiabanken Boligkreditt AS on 1 November 2017 the Board of Directors' proposal for an amendment of the Articles of Association to change the company's name was approved. The amendment will enter into force on 6 November 2017, from which time the company s name will be Sbanken Boligkreditt AS. The increase was due to the acquisition of NOK 4.8 billion in residential mortgages from Skandiabanken ASA, less ordinary repayments from customers in the period. PAGE 2/24 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

4 Outlook Macroeconomic developments in Norway indicate that economic growth is recuperating, supported by lower unemployment and increased energy prices. Monetary policy is expansive and supportive of structural adjustments in the Norwegian economy, but is expected to be less expansionary going forward. The new regulations on requirements for new residential mortgage loans that were implemented in Q have shown effect, and Norwegian house prices have corrected since spring, with regional differences. Norges Bank expects house price growth in Norway to slow in 2017 and 2018, and to edge up from Prices are expected to be supported by an improved labour market, while increased mortgage rates are expected to have the opposite effect. Norges Bank decided to maintain a stable key policy rate of 0.5 per cent at the interest rate decision meetings in both September and October. The next interest rate decision will be announced on 14 December The latest Monetary Policy Report indicates that the key policy rate will remain at 0.5 per cent in the period ahead. Skandiabanken Boligkreditt expects to take advantage of its newly established Euro Medium Term Note (EMTN) programme for long-term funding by issuing covered bonds. The programme have a limit of EUR 5 billion. The first EUR issue is expected in the first half-year of 2018, and the programme is expected to ensure quick and efficient access to the European capital markets. Losses related to mortgages are expected to remain at the marginal historical levels in Volume growth is expected to continue into the fourth quarter. Bergen, 1 November 2017 The Board of Directors, Skandiabanken Boligkreditt AS Petter Skouen (Chairman) Ragnhild Wiborg Mai-Lill Ibsen Henning Nordgulen (CEO)

5 Income statement In NOK thousand Note Q3 17 Q3 16 Jan- Sep 17 Jan- Sep Interest income Interest expense Net interest income Net gain (loss) on financial instruments Other income Other operating income Personnel expenses Administrative expenses Profit before loan losses Loan losses Profit before tax Tax expense Profit for the period Attributable to Shareholders Tier 1 capital holders Profit for the period Earnings per share, see note 22 Statement of comprehensive income In NOK thousand Q3 17 Q3 16 Jan- Sep 17 Jan- Sep Profit for the period Other comprehensive income Other comprehensive income that can be reclassified to profit or loss after tax Other items that cannot be reclassified to profit or loss after tax Total components of other comprehensive income (after tax) Total comprehensive income for the period Attributable to Shareholders Tier 1 capital holders Total comprehensive income for the period PAGE 5/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

6 Balance sheet In NOK thousand Note Assets Loans to and receivables from credit institutions Loans to customers 6,7,8, Net loans to customers and credit institutions Commercial paper and bonds available for sale Deferred tax assets Other assets Advance payment and accrued income Total assets Liabilities Loans from credit institutions 10, Debt securities issued 14, Taxes payable Other liabilities Subordinated loan Total liabilities Equity Share capital Share premium Additional Tier 1 capital Other equity Total equity Total liabilities and equity PAGE 6/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

7 Statement of changes in equity In NOK thousand Share capital Share premium Additional Tier 1 capital Changes in fair value of financial instruments available for sale Balance sheet as at Profit for the period to other equity ( ) Profit for the period to Tier 1 capital holders ( ) Issued Additional Tier 1 capital ( ) Payments to Tier 1 capital holders ( ) Net change in fair value of financial instruments available for sale ( to ) Other equity Total equity Balance sheet as at Profit for the period to other equity ( ) Profit for the period to Tier 1 capital holders ( ) Issued Additional Tier 1 capital ( ) 0 0 Payments to Tier 1 capital holders ( ) Net change in fair value of financial instruments available for sale ( to ) Balance sheet as at Profit for the period to other equity ( ) Profit for the period to Tier 1 capital holders ( ) Issued Additional Tier 1 capital ( ) 0 0 Payments to Tier 1 capital holders ( ) Net change in fair value of financial instruments available for sale ( to ) Capital increase Q1 17* Capital increase Q2 17** Balance sheet as at Skandiabanken Boligkreditt AS is a wholly owned subsidiary of Skandiabanken ASA. *In Q the share capital in Skandiabanken Boligkreditt AS was increased by NOK from NOK to NOK by increasing the nominal value from NOK 1 to NOK 5 per share (increase of NOK 4 per share). The share premium was increased by NOK The Financial Supervisory Authority of Norway gave its consent to the share capital increase and the new share capital was registered with the Register of Business and Enterprises on 10 March **In Q the share capital in Skandiabanken Boligkreditt AS was increased by NOK from NOK to NOK by increasing the nominal value from NOK 5 to NOK 6 per share (increase of NOK 1 per current shares) and issuing of new shares with nominal value of 6 per share. The Financial Supervisory Authority of Norway gave its consent to the share capital increase and the new share capital was registered with the Register of Business and Enterprises on 10 July PAGE 7/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

8 Statement of cash flows In NOK thousand Note Cash flows from operating activities Net payments on loans to customers Interest received on loans to customers Interest received on loans to credit institutions Interest paid on loans and deposits from credit institution Net receipts/payments from buying and selling financial instruments at fair value Interest received from commercial paper and bonds Payments related to administrative expenses Taxes paid Other receipts/payments Net cash flows from operating activities Cash flows from investment activities Net cash flows from investment activities Cash flows from financing activities Receipts on issued covered bonds Payments on matured and redeemed covered bonds Interest paid on covered bonds Net receipts on loans and deposits from credit institution Receipts on subordinated loan Interest paid on subordinated loan Receipts on share capital and share premium net of issuing cost EQ* Receipts on issued additional Tier1 capital Interest paid on additional Tier 1 capital Net cash flows from financing activities Total net cash flows Cash at the beginning of the period Cash at the end of the period Change in cash Cash Loans to credit institutions Loans from credit institutions Total cash EQ* = see statement of changes in equity PAGE 8/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

9 Notes Note 1 Accounting Principles The quarterly financial statements for Skandiabanken Boligkreditt AS have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and adopted by the EU. A description of the accounting principles applied in the preparation of the financial statements appears in the annual report for There have been no changes or amendments to accounting principles in the period. When preparing the financial statements, the management makes estimates, judgments and assumptions that affect the application of the accounting principles and the carrying amount of assets, liabilities, income and expenses. Estimates and assumptions are subject to continual evaluation and are based on historical experience and other factors, including expectations of future events that are believed to be probable on the balance sheet date. A description of the critical accounting estimates and areas where judgment is applied appear in note 2 in the annual report for The parent bank has established an IFRS9 project for the Skandiabanken group. At present, preliminary findings do not indicate that the implementation effect of IFRS9 will have significant impact on Skandiabanken Boligkreditt s financial statements. For further information regarding IFRS 9, please refer to note 1 in the 2016 annual report for Skandiabanken ASA. Note 2 Segment information Skandiabanken Boligkreditt AS has only one reporting segment, which comprises home loans to private individuals. Management monitors the company only in relation to this segment. Note 3 Capital adequacy The capital adequacy regulations are intended to improve institutions risk management and achieve closer concordance between risk and capital. The applicable regulations for Norwegian banks are adapted to the EU s capital adequacy regulations for credit institutions and investment firms (CRD IV/CRR). Skandiabanken Boligkreditt uses the standard method to establish the risk weighted volume for credit risk and the basic method to establish the risk weighted volume for operational risk. At the balance sheet date no exposure was included in the risk weighted volume for market risk. In NOK thousand Nominal exposure Risk- Weighted volume Nominal exposure Risk- Weighted volume Nominal exposure Risk- Weighted volume Central governments Regional governments Institutions Secured by mortgages on immovable property Exposures in default Covered bonds Other items Total credit risk, standardised method Operational risk Total risk- weighted volume Capital base Share capital Share premium Other equity Additional Tier 1 capital Profit for the period* Total booked equity Additional Tier 1 capital instruments included in total equity PAGE 9/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

10 Common equity Tier 1 capital instruments Deductions Goodwill, deferred tax assets and other intangible assets Value adjustment due to the requirements for prudent valuation (AVA) Profit for the period, not eligible* Common equity Tier 1 capital Additional Tier 1 capital Tier 1 capital Tier 2 capital Own funds (primary capital) Specification of capital requirements Minimum requirements CET1 capital 4.5 % % % Capital conservation buffer 2.5 % % % Systemic risk buffer 3.0 % % % Countercyclical capital buffer 1.5 % % % Additional Tier 1 capital 1.5 % % % Tier 2 capital 2.0 % % % Total minimum and buffer requirements own funds (primary capital) 15.0 % % % Available CET1capital after buffer requirements Available Own funds (primary capital) Capital ratio % Common equity Tier 1 capital 16.3 % 14.4 % 14.2 % Additional Tier 1 capital 1.3 % 1.8 % 1.8 % Tier 2 capital 1.8 % 2.6 % 2.5 % Total capital ratio 19.3 % 18.7 % 18.5 % Capital ratio % (including profits**) Common equity Tier 1 capital 16.7 % 14.4 % 14.2 % Additional Tier 1 capital 1.3 % 1.8 % 1.8 % Tier 2 capital 1.8 % 2.6 % 2.5 % Total capital ratio 19.7 % 18.7 % 18.5 % * Including 100 per cent of the profit for the first half year of 2017 and 0 per cent for this quarter, because of partial external audit of the half-year accounts. ** Including 100 per cent of the profit. Expected dividends for the group are deducted in the parent bank s capital ratio calculation. Note 4 Leverage ratio The leverage ratio requirements is a supplement to the risk-weighted minimum capital requirements and states that the capital base in financial institutions shall also comprise a defined percentage of the value of the company s assets and off-balance-sheet liabilities, calculated without risk weighting. The regulations are intended to prevent banks from using too low of a risk weight in the capital adequacy calculations, and to ensure that the banks maintain a minimum capital level, even with skewing of the portfolio towards low-risk segments. The capital target is to consist of Tier 1 capital and the exposure target to follows the rules in the Commission Delegated Regulation (EU) The regulation has not yet been incorporated into the EEA Agreement, or translated into Norwegian. The Norwegian Ministry of Finance will issue further rules for calculating the exposure target during the spring of The table below shows the calculation, on the basis of existing rule proposals and with credit conversion factors (CCFs) based on the current standardised approach, subject to a CCF-floor of 10 per cent. PAGE 10/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

11 In NOK thousand Off balance sheet commitments Loans and advances and other assets Regulatory adjustments included in Tier 1 capital Total leverage exposure Tier 1 capital* Leverage ratio % 6.3 % 5.6 % 5.8 % Leverage ratio % (including profits**) 6.4 % 5.6 % 5.8 % Leverage Ratio requirements Minimum requirements 3.0 % Buffer requirements credit institutions 0.0 % Total minimum and buffer requirements (Tier 1 capital) 3.0 % Available Tier 1 capital after minimum and buffer requirements * Including 100 per cent of the profit for the first half year of 2017 and 0 per cent for this quarter, because of partial external audit of the half-year accounts. ** Including 100 per cent of the profit. Expected dividends for the group are deducted in the parent bank s capital ratio calculation. Note 5 Financial risk management Skandiabanken Boligkreditt s risk strategy comprises a combination of its risk philosophy and risk management principles. Risk philosophy Skandiabanken Boligkreditt s core business involves issuing or purchasing residential mortgages, property mortgages and funding of the lending activity, primarily through the issuance of covered bonds. Skandiabanken Boligkreditt shall not assume any material risk other than that deriving from this core business, i.e. primarily credit risk and liquidity risk. The company shall have a sound risk culture, based on openness, transparency and competence, and shall constantly challenge its methods, processes and procedures in order to improve its performance. Risk management principles Skandiabanken Boligkreditt shall adopt a holistic approach to risk management. The following principles therefore apply: - Skandiabanken Boligkreditt s Board of Directors shall establish specific management frameworks for each risk area. - Risk management and reporting shall be performed in accordance with applicable frameworks and objectives. - Risk management shall be an ongoing and continuous process. - Risk reporting shall be framed in an understandable manner and provide a clear picture of Skandiabanken Boligkreditt s risk situation to all stakeholders. - Responsibility for entering into agreements that cause the company to incur risk is delegated through personal authorisations. Organisation of risk management Skandiabanken Boligkreditt s organisation of risk management is designed so as to secure implementation of the company s risk strategy. Skandiabanken Boligkreditt does not currently employ any staff. The CEO s services are hired from the parent bank. Skandiabanken Boligkreditt s functions for handling risk and capital management include: - The Board of Directors - The CEO - The bank s Risk Management function - The bank s Finance functions, including CFO, Asset and Liability Committee and Treasury - Internal Auditor - External Auditor - Independent Inspector For further information about risk management and the different types of risks in Skandiabanken Boligkreditt, reference is made to the annual report for PAGE 11/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

12 Note 6 Loans to customers In NOK thousand Loans to customers Loans without agreed maturity or notice period Loans with agreed maturity or notice period Total loans to customers (gross) Write-downs for individually assessed impaired loans Write-downs for collectively assessed impaired loans Total loans to customers (net) Residual time to maturity (gross loans) In NOK thousand Upon request Maximum 3 months months - 1 year years More than 5 years Total Note 7 Loans to customers by geographical area Lending by geographical area* In NOK thousand Percentage Gross lending Percentage Gross lending Percentage Gross lending Østfold 5.4 % % % Akershus 24.4 % % % Oslo 22.3 % % % Hedmark 1.0 % % % Oppland 1.0 % % % Buskerud 5.9 % % % Vestfold 3.9 % % % Telemark 0.7 % % % Aust-Agder 0.7 % % % Vest-Agder 1.0 % % % Rogaland 7.3 % % % Hordaland 13.8 % % % Sogn og Fjordane 0.2 % % % Møre og Romsdal 1.4 % % % Sør-Trøndelag 4.1 % % % Nord-Trøndelag 0.5 % % % Nordland 2.5 % % % Troms 3.2 % % % Finnmark 0.7 % % % Total gross lending per geographical area % % % * The basis for the geographical distribution is the customer s residential address. PAGE 12/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

13 Note 8 Credit risk exposure and collateral Credit risk or counterparty risk is the risk of loss as a result of the company s customers and counterparties failing to fulfil their payment obligations. The company s maximum credit exposure will be the book value of financial assets and any associated off-balance sheet liabilities. The company s customer exposures comprises the bulk of the company s total credit exposure. A high percentage of the company s lending is collateralised. Collateral in the private retail market essentially comprise fixed property. The table below shows the relationship between total credit exposure and the associated collateral distributed to exposure class. Lending secured by mortgages includes the percentage distributed of exposure relating to the various loan-to-value levels. For example, the line 0-40% means that the exposures amount to less than 40 percent of the value of the collateral. 100% means that the loan amount exceeds the value of the hedging object or that the loan is unsecured. The entire loan per collateral is placed in the same loan-to-value category. The property values on which the calculations are based are updated in the last month of each quarter and are therefore representative of the current market value. The calculation of loan-to-value does not take into account any additional collateral. In NOK thousand Loan-to-value, Residential mortgages Distribution in percent Number of loans Gross carrying amounts Off-balance sheet amounts Maximum exposure to credit risk 0 % - 40 % 27 % % - 60 % 42 % % - 80 % 30 % % - 90 % 0 % % % 0 % > 100 % 0 % Residential mortgages Exposure to customers Loans to and receivables from credit institutions Commercial paper and bonds available for sale Other assets Exposure to others Gross exposure The table below shows the percentage allocation of exposures for home loans for various levels of loan-to-value. Where the entire exposure in the table above is placed in a related loan-to-value level, the relative share of the loan exposure at each level is shown in the table below. In NOK thousand Loan-to-value, Residential mortgages (relative distribution) Distribution in percent Gross carrying amounts 0 % - 85 % % % % % > 100 % % 754 Residential mortgages PAGE 13/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

14 In NOK thousand Loan-to-value, Residential mortgages Distribution in percent Number of loans Gross carrying amounts Off-balance sheet amounts Maximum exposure to credit risk 0 % - 40 % 29 % % - 60 % 44 % % - 80 % 27 % % - 90 % 0 % % % 0 % > 100 % 0 % Residential mortgages Exposure to customers Loans to and receivables from credit institutions Commercial paper and bonds available for sale Other assets Exposure to others Gross exposure In NOK thousand Loan-to-value, Residential mortgages (relative distribution) Distribution in percent Gross carrying amounts 0 % - 85 % % % % % 731 > 100 % % 510 Residential mortgages In NOK thousand Loan-to-value, Residential mortgages Distribution in percent Number of loans Gross carrying amounts Off-balance sheet amounts Maximum exposure to credit risk 0 % - 40 % 28 % % - 60 % 43 % % - 80 % 29 % % - 90 % 0 % % % 0 % > 100 % 0 % Residential mortgages Exposure to customers Loans to and receivables from credit institutions Commercial paper and bonds available for sale Other assets Exposure to others Gross exposure In NOK thousand Loan-to-value, Residential mortgages (relative distribution) Distribution in percent Gross carrying amounts 0 % - 85 % % % % % > 100 % % 392 Residential mortgages PAGE 14/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

15 Note 9 Loan-to-value (LTV) and cover pool In NOK thousand Debt related to securities issued, nominal value Debt related to securities issued, carried value Loans to customers (gross) Average size of loan per customer Number of loans Weighted average since issuing of the loans (months) Weighted average remaining maturity (months) Average LTV (percent) Cover pool Loans secured with mortgages Not eligible for the cover pool Net loans that are in the cover pool Commercial paper and bonds Supplementary assets Total cover pool Cover pool Nominal value Carried value Nominal value Carried value Nominal value Over-collateralisation (percent) Amount surpassing legal minimum requirements Carried value Amount surpassing minimum requirements as indicated by rating agency Note 10 Credit institutions receivables and liabilities In NOK thousand Loans to and receivables from credit institutions Loans to and receivables without maturity or notice period Loans to and receivables with agreed maturity or notice period Write-downs on impaired loans Total loans to and receivables from credit institutions Liabilities to credit institutions Loans and deposits from credit institutions without agreed maturity or notice period Loans and deposits from credit institutions with agreed maturity or notice period Total liabilities to credit institutions PAGE 15/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

16 Note 11 Loan losses Loan loss provisions In NOK thousand Opening balance individual write-downs Increase in write-downs on loans previously written down Write-downs om loans not previously written down Reversal of write downs as a result of confirmations in the period Reversal of individual write-downs in the period Closing balance Opening balance collective write-downs /- change in collective write-downs in the period Closing balance group collective write-downs Closing balance total write-downs Individual write-downs Individual write-downs (collectively considered) Collective write-downs Total write downs Specification of loan losses Actual losses Reversal of previous years' depreciation Increase in provision Reversal of provisions Recoveries of previously written-off Net cost of losses in the period Losses by sector and industry Retail market (individuals) Total Write-downs by product group Residential mortgages Total Note 12 Non-performing and doubtful loans Non-performing and doubtful loans Skandiabanken Boligkreditt AS has internal routines for ongoing monitoring of exposures for which repayments and interest have not been paid on time or for which authorised overdraft limits are exceeded, where the reason is deemed to be the customer s inability or lack of propensity to pay. Payment defaults of more than 60 days and more than NOK 200 are reported as non-performing. If other matters are identified that make it probable that the customer s financial position will result in loss, the exposure is classified as doubtful. The need to recognise individual impairments is assessed against the value of available collateral for the exposure. The table below shows the relationship between the gross book value of non-performing and doubtful loans and the associated individual impairments. PAGE 16/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

17 In NOK thousand Non-performing loans with write-downs Non-performing loans without write-downs Total non-performing loans (more than 60 days) Doubtful loans Gross non-performing and doubtful loans Individual write-downs Net non-performing and doubtful loans Provisioning ratio 0 % 0 % 0 % Overdue loans without write-downs - age distribution The table below shows the book value of overdue loans and overdrawn amounts on credits allocated by number of days after maturity, where no impairments have been recognised. The table is intended to provide an analysis of exposures where there is inadequate ability or propensity to pay, rather than overdue amounts attributable to a delay in transferring funds. Based on this and the company s internal routines for monitoring overdue exposures, the default must exceed NOK 200 for more than 6 days to be included in the table below In NOK thousand 7-30 days days days More than 90 days Total Mortgages Loans to customers In NOK thousand 7-30 days days days More than 90 days Total Mortgages Loans to customers In NOK thousand 7-30 days days days More than 90 days Total Mortgages Loans to customers Note 13 Liquidity risk (LCR) and NSFR The liquidity requirements are intended to guarantee satisfactory liquidity management by ensuring that the institutions have sufficient liquid assets to cover their liabilities on maturity and have stable and long-term financing at all times. The Liquidity Coverage Ratio (LCR) is intended to ensure that institutions can convert sufficient assets to cash to cover expected net liquidity outflows over the next 30 days in stressed situations in the money and capital markets. The Net Stable Funding Ratio (NSFR) is intended to ensure that less liquid assets are financed over the long term. On 22 December 2015, based on the CRR/CRD IV Regulation, Finanstilsynet issued its Regulation on Calculation of Liquid Assets, Payments and Deposits in the Liquidity Coverage Ratio (LCR). For Norwegian covered bonds companies, including Skandiabanken Boligkreditt, the LCR requirement applied from 30 June The requirement is gradually phased in, and rising from 70 per cent to 80 per cent from 31 December 2016, and finally to 100 percent from 31 December The NSFR has not yet been introduced as a minimum requirement. On 23 November 2016 the EU Commission proposed the introduction of a requirement of 100 per cent which will comes into force two years after publication in the Official Journal of the European Union. The requirement will thus presumably apply from the end of 2018 or beginning early in PAGE 17/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

18 LCR (Liquidity Coverage Ratio) In NOK thousand Carrying Carrying Carrying value Value LCR value Value LCR value Value LCR Level 1 - assets exclusive Covered bonds Level 1 Covered bonds Level 2A - assets Level 2B - assets Assets ineligible as "liquid assets" Total assets Net outflows LCR % 549 % 239 % 610 % Note 14 Debt securities issued Carried at amortised cost: In NOK thousand Currency Bonds issued NOK Subordinated loan NOK Total debt securities issued Specification of covered bonds as at : ISIN Covered bonds Issuing company Nominal value Currency Interest Maturity Carrying value NO Skandiabanken Boligkreditt AS NOK Floating NO Skandiabanken Boligkreditt AS NOK Floating NO Skandiabanken Boligkreditt AS NOK Floating NO Skandiabanken Boligkreditt AS NOK Floating NO Skandiabanken Boligkreditt AS NOK Floating NO Skandiabanken Boligkreditt AS NOK Floating Total covered bonds All covered bond loans have soft bullet with the possibility to extend the maturity with one year. Subordinated loan NO Skandiabanken Boligkreditt AS NOK Floating ** Total subordinated loan ** First possible call date for the issuer is 22 June The loan agreement has covenants to qualify as Tier 2 capital. Changes of debt securities: January - September Issued Matured Redeemed Other adjustments Covered bonds (nominal) Subordinated loan Total PAGE 18/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

19 Note 15 Additional Tier 1 Capital (hybrid capital) On 21 June 2016, Skandiabanken Boligkreditt AS issued a hybrid capital instrument with a nominal value of NOK 125 million. The instrument is perpetual with an option for the issuer to redeem the capital at specific dates, the first time being 22 June 2021, 5 years after the issue date. The instrument has an interest rate of NIBOR 3 months plus a margin of 5.3 percent. The loan agreement fulfils the Norwegian regulatory requirements for inclusion in the Bank s Tier 1 capital. This implies that the issuer, at its sole discretion, has the right to withhold interest and/or redemption of the instrument. This implies that the instrument do not fulfil the definition of a debt instrument according to IAS 32 and is such defined as equity in the company s balance sheet. In NOK thousand Currency Additional Tier 1 capital NOK Total Additional Tier 1 capital Specification of additional Tier 1 capital as at : ISIN Additional Tier 1 capital Issuing company Nominal value Currency Interest Maturity* Carrying amounts NO Skandiabanken Boligkreditt AS NOK 3M Nibor % Perpetual Total additional Tier 1 capital * The Tier1 capital is perpetual with an option for the issuer to redeem the capital at specific dates, the first time being 22 June Change of additional Tier 1 capital January - September Issued Matured Redeemed Other adjustments Additional Tier 1 capital Total As at 30 September 2017, there is NOK 0.2 million in accrued interest related to additional Tier 1 capital. This has been recognised against the additional Tier 1 capital and the carried value including accrued interest is million NOK Note 16 Net interest income Net interest income In NOK thousand Q3 17 Q3 16 Jan- Sep 17 Jan- Sep Loans to and receivables from credit institutions Loans to customers Commercial paper and bonds Total interest income Loans and deposits from credit institutions Debt securities issued Subordinated loan Total interest expense Net interest income All interest income from customers is related to residential mortgages PAGE 19/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

20 Note 17 Administrative expenses Other administrative expenses In NOK thousand Q3 17 Q3 16 Jan- Sep 17 Jan- Sep Consultants and other external services Other operating expenses Total other administrative expenses Note 18 Tax expense In NOK thousand Q3 17 Q3 16 Jan- Sep 17 Jan- Sep Taxes payable Change in deferred tax Correction of taxes payable previous year Total tax expense Reconciliation of the tax expense: Profit before tax Expected tax expense at nominal rate of 24 % (in 2017) and 25 % (in 2016) Tax effect from interest to Tier 1 capital holders Correction of taxes payable previous year Total tax expense Effective tax rate 23.1 % 23.5 % 22.9 % 24.4 % 24.1 % Note 19 Fair value of financial instruments Fair value of financial instruments (in NOK thousands) In NOK thousand Carrying value Fair value Carrying value Fair value Carrying value Fair value Assets Loans to and receivables from credit institutions (ac) Loans to customers (ac) Commercial paper and bonds available for sale Other assets (ac) Total assets financial instruments Liabilities Loans and deposits from credit institutions (ac) Debt securities issued (ac) Other liabilities (ac) Subordinated loan (ac) Total liabilities financial instruments (ac) = assets and liabilities booked at amortised cost PAGE 20/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED

21 Fair value of financial instruments measured at amortised cost Cash and cash equivalents, loans to credit institutions and loans to customers and debt securities are measured at amortised cost. Measurement at amortised cost imply that a financial asset or liability is recognised to the present value of the contractual cash flows using effective interest rate method, adjusted for potential impairment. This measurement method will not necessarily provide a carrying value equal to the fair value of the financial instrument due to volatility in the market, changed market conditions, asymmetrical information and changes in investors risk- and return expectations. Cash and cash equivalents and loans and advances: Fair value is estimated based on amortised cost as all assets are recognised in the accounts based on the contractual cash flow with floating interest rate and that loans with impairment indicators are written down to fair value of expected cash flows. There is no active market for loan portfolios. Debt to credit institutions are liabilities with floating interest rate and as there have not been any significant changes in the credit spread, amortised cost is assumed to be a reasonable approximation to fair value. Debt securities are measured at fair value based on prices sourced from Nordic Bond Pricing. Nordic Bond Pricing has estimated the fair value based on available price information from investment banks and brokers trading in the bond markets Level 1 Level 2 Level 3 Total Commercial paper and bonds available for sale Total Financial instruments measured at fair value level 3 In NOK thousand Total Opening balance 1 January Net gain/(loss) on financial instruments (unrealised)* 0 0 Acquisitions / exits 0 0 Sale 0 0 Settlement 0 0 Transferred from Level 1 or Level Transferred to Level 1 or Level Other 0 0 Closing balance at 30 September There has been no transfers of financial instruments between Level 1 and Level 2 in the period January to September Level 1 Level 2 Level 3 Total Commercial paper and bonds available for sale Total Financial instruments measured at fair value level 3 In NOK thousand Total Opening balance 1 January Net gain/(loss) on financial instruments (unrealised)* 0 0 Acquisitions / exits 0 0 Sale 0 0 Settlement 0 0 Transferred from Level 1 or Level Transferred to Level 1 or Level Other 0 0 Closing balance at 30 September PAGE 21/25 THIRD QUARTER 2017 SKANDIABANKEN BOLIGKREDITT AS UNAUDITED