INTERIM REPORT. Q (unaudited)

Transcription

1 INTERIM REPORT Q (unaudited)

2 CONTENTS 3 Key figures, parent company/consolidated 4 Q2 interim report 30 June Consolidated income statement 9 Consolidated balance sheet 10 Consolidated cash flow statement 11 Consolidated statement of changes in equity 12 Notes 26 Declaration by the Board of Directors and CEO 27 Income statement, parent company 28 Balance sheet, parent company 29 Consolidated income statement as a % of average total assets 30 Consolidated financial results by quarter 31 Recent financial performance by quarter as a % of average total assets 32 Information about the company GRAPHIC DESIGN: Sparebanken Sogn og Fjordane / E. Natvik Prenteverk AS ENGLISH TRANSLATION: Språkverkstaden. 2 Sparebanken Sogn og Fjordane KVARTALSRAPPORT 2. KVARTAL 2012

3 Key figures, consolidated AMOUNTS IN NOK MILLION INCOME STATEMENT Net interest income Dividends and gains/losses on financial instruments Other operating income Operating expenses Profit/loss before loan impairment charge (incl. securities) Profit/loss before loan impairment charge (excl. securities) Loan impairment charge Profit/loss before taxation Tax expense Profit/loss after taxation Other comprehensive income Comprehensive income BALANCE SHEET Assets Gross loans and advances to customers Impairment provisions Security investments (shares, commercial paper and bonds) Debt and equity Deposits from and debt to customers Debt securities and debt to credit institutions Equity Total assets Average total assets KEY FIGURES Profitability Net interest income as a % of average total assets 1,72 % 1,74 % 1,75 % 1,74 % Dividends and gains/losses on financial instruments 0,05 % 0,01 % 0,15 % 0,07 % Other operating income (excl. inc. from fin. instr.) as a % of average total assets 0,28 % 0,30 % 0,29 % 0,33 % Operating expenses as a % of average total assets 0,87 % 0,86 % 0,88 % 0,89 % Profit/loss before impairment charge as a % of average total assets 1,06 % 1,16 % 1,32 % 1,25 % Profit/loss before tax as a % of average total assets 1,00 % 1,08 % 1,14 % 1,14 % Comprehensive income as a % of average total assets 0,77 % 0,99 % 0,76 % 0,83 % Oper. exp. as a % of oper. income excl. inc. from fin. instr. 43,86 % 42,41 % 42,93 % 42,90 % Oper. exp. as a % of oper. income incl. inc. from fin. instr. 45,07 % 42,59 % 39,95 % 41,49 % Impairment charge as a % of gross loans 0,03 % 0,04 % 0,20 % 0,12 % Return on equity before tax 13,35 % 14,71 % 15,84 % 16,14 % Return on equity (comprehensive income) 10,23 % 13,37 % 10,61 % 11,77 % Financial strength Capital adequacy ratio 15,51 % 14,20 % 15,45 % 14,44 % Core capital adequacy ratio 13,38 % 13,08 % 13,23 % 13,82 % Core Tier 1 capital adequacy ratio 13,38 % 11,70 % 13,23 % 12,41 % Equity ratio 7,61 % 7,47 % 7,67 % 7,57 % Balance sheet history Growth in total assets (year-on-year) 5,35 % 10,18 % 7,74 % 6,49 % Growth in gross customer lending (year-on-year) 7,14 % 6,98 % 7,61 % 6,62 % Growth in customer deposits (year-on-year) 7,02 % 9,57 % 8,85 % 8,27 % Deposits as a % of consolidated gross lending 62,19 % 62,26 % 59,87 % 59,19 % Deposits as a % of parent company s gross lending 83,96 % 82,60 % 80,72 % 78,90 % Employees Full-time equivalent administrative staff Full-time equivalent cleaning, canteen staff, etc Note: Figures for previous periods have been restated. For further details see Note 1b. Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 3

4 Interim report 30 June 2015 All of the figures specified below refer to the consolidated financial statements unless otherwise stated. The figures in brackets are the figures for the same period last year. H HIGHLIGHTS Comprehensive income of NOK 167 million (200 million) Pre-tax profit of NOK 218 million (220 million) Profit before loan impairment charge and excl. gains/ losses on financial instruments of NOK 242 million (237 million) Net loss of NOK 11 million (2 million) on financial instruments Impairment charge of NOK 12 million (15 million) Net gain on available-for-sale shares of NOK 12 million (38 million) Annualised return on equity of 10.2% (13.4%) FINANCIAL RESULTS FOR THE FIRST SIX MONTHS OF 2015 The Bank s pre-tax profit for the first half of 2015 was NOK 218 million, down NOK 2 million (0.9%) from the equivalent period last year. Profit fell due to a NOK 10 million deterioration in the contribution from financial instruments. Meanwhile, net interest income was NOK 19 million (5.5%) higher than last year and operating expenses rose NOK 15 million (8.3%). The loan impairment charge was NOK 12 million, which was NOK 3 million less than last year. Other comprehensive income came to NOK 12 million in the first half of 2015, compared with a NOK 38 million in the year-earlier period. The figure for the first half of last year was particularly high due to a valuation gain on our shares in Nets. The Bank s comprehensive income for the first six months was NOK 167 million, NOK 33 million lower than for the equivalent period last year. Comprehensive income H H H PROFIT FOR THE SECOND QUARTER In the second quarter, comprehensive income amounted to NOK 93 million, giving a return on equity of 11.4%, compared with NOK 95 million and 12.7% in the second quarter last year. The main reason why return on equity fell was an increase in equity. NET INTEREST INCOME Net interest income totalled NOK 371 million, which was NOK 19 million (5.5%) higher than in the year-earlier period. The increase was primarily due to strong growth in deposits and loans. The net interest margin was 1.72%, compared with 1.74% in the year-earlier period. The Bank has announced a reduction in the lending and deposit rates to customer and the change will take full effect in Q3. The changes are parallel, so they will have no significant impact on net interest income. OTHER OPERATING INCOME Other operating income totalled NOK 49 million, compared with NOK 59 million in the year-earlier period. This reduction was mainly due to a NOK 10 million deterioration in the contribution from financial instruments compared with the first half of last year. This can partly be explained by the contribution from shares being NOK 7 million lower than last year. For further details see Note 3. OPERATING EXPENSES Operating expenses came to NOK 189 million, NOK 15 million (8.3%) more than last year. The increase was mainly due to higher staff and IT expenses. Several major IT development projects helped to push up expenses, whereas conversely expenses for the first half of last year were kept down by the reversal of IT expenses allocated in prior years. After adjusting for these factors, expenses rose by around 5%. Operating expenses were equivalent to 0.87% of average total assets, against 0.86% for the same period last year. The cost/income ratio was 45.1%, against 42.6% last year. Excluding financial instruments, the cost/income ratio was 43.9%, against 42.4% last year. IMPAIRMENT PROVISIONS FOR LOANS AND GUARANTEES The Group s impairment charge for losses on loans and guarantees came to NOK 12 million, down NOK 3 million from the year-earlier period. As a % of gross loans, the impairment charge was 0.03%, compared with 0.04% in the year-earlier period. Impairment provisions for loans and guarantees totalled NOK 200 million at 30 June 2015, compared with NOK 190 million at 31 December Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

5 Of the provisions at 30 June 2015, NOK 107 million were individually assessed impairment provisions and NOK 93 million were collectively assessed provisions. Collectively assessed provisions are estimated using a model that takes into account the quality, size and composition of the loan portfolio. Customer deposits 30,0 25,0 24,0 22,4 Q Q ,0 OTHER COMPREHENSIVE INCOME In the first six months of 2015, other comprehensive income came to NOK 12 million, compared with NOK 38 million in the year-earlier period. This item relates to valuation gains on shares classified as available for sale. In the first half of last year this figure was particularly high due to a valuation gain on our shares in Nets. 15,0 10,0 5,0 13,1 14,4 9,3 9,6 BALANCE SHEET The Group had total assets of NOK 44 billion at 30 June This represented an increase of NOK 2.3 billion (5.4%) over the past 12 months. The increase in total assets was primarily due to increased lending to customers. LOANS TO CUSTOMERS Gross loans to customers totalled NOK 38.6 billion at the end of the quarter. Growth over the past year was NOK 2.6 billion (7.1%), while it was NOK 1.1 billion (3.0%) in the year to date. Over the past 12 months, lending to the retail market (RM) rose by 9.6%, while lending to the corporate market (CM) (including loans to the public and financial sectors) was up 1.1%. Loans to customers 50,0 Q ,0 Total deposits Over the past 12 months, RM deposits increased by 9.8%, while CM deposits (incl. deposits from the public and financial sectors) rose 3.1%. The deposit/loan ratio was 62.2% at 30 June 2015, compared with 62.3% at 30 June CREDIT RISK The outstanding balance of loans that were over 90 days in arrears improved to NOK 187 million, down NOK 249 million from the equivalent figure at 31 December The Bank had NOK 185 million of loans considered at risk of default that are not currently in default, which was NOK 42 million lower than at 31 December As a proportion of outstanding loans, exposure to the corporate market was 27.6%, compared with 29.2% a year earlier. The proportion of loans classified as high risk was significantly lower at the end of the second quarter than at the end of last year, both in the retail and corporate markets. RM CM/PS/Fin. 40,0 36,0 38,6 Q The amount of equity and subordinated debt required to meet credit risk rose to NOK 1,740 million, up by NOK 10 million (0.6%) since 31 December ,0 20,0 25,5 28,8 LIQUIDITY AND FINANCING In managing its liquidity, the Bank focuses on its deposit/loan ratio, liquidity buffer and the maturity structure of its funding. 10,0 0 Gross loans CM/PS/FS DEPOSITS Customer deposits totalled NOK 24.0 billion. Growth over the past 12 months was NOK 1.6 billion (7.0%). In the year to date, deposits increased by 7.0%. RM 10,5 10,7 At the end of the second quarter, the Group had a liquidity buffer of NOK 5.2 billion invested in short-term deposits with Norges Bank and other banks and in marketable bonds and other securities. The Bank uses mortgages to issue covered bonds through its wholly-owned subsidiary Bustadkreditt Sogn og Fjordane AS. At 30 June 2015, Bustadkreditt Sogn og Fjordane AS had issued covered bonds with a face value of NOK 7.8 billion. The total value of its cover pool was NOK 10.4 billion. At 30 June 2015, the company s cover pool was worth around NOK 2.7 billion more than the loans it was being used to secure, which means that the company is in a position to issue additional covered bonds for some of the surplus amount. Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 5

6 SUBSIDIARIES Bustadkreditt Sogn og Fjordane AS Bustadkreditt Sogn og Fjordane AS is a wholly-owned subsidiary of the Bank. At 30 June 2015, the company had a NOK 10 billion loan portfolio and NOK 729 million in equity. The company made a profit before tax of NOK 72 million in the first six months of the year, against NOK 81 million during the same period last year. The fall in profit was due to lower margins on its loans. Bankeigedom Sogn og Fjordane AS Bankeigedom Sogn og Fjordane AS is a wholly-owned subsidiary, which owns the Group s largest buildings. It made a pre-tax of NOK 3.7 million, compared with NOK 3.2 million in the same period last year. Eigedomsmekling Sogn og Fjordane AS Eigedomsmekling Sogn og Fjordane AS is a whollyowned subsidiary of the Bank. In the first half of the year it had NOK 12.0 million in revenue, NOK 1.4 million higher than in the equivalent period last year. The company made a pre-tax profit of NOK 2.0 million, compared with NOK 2.6 million in the first half of last year. Profit fell as a result of more accurate accrual of expenses, and without this change, profit would have been at same level as last year. FINANCIAL STRENGTH AND RETURN ON EQUITY The Group s equity at 30 June 2015 totalled NOK 3.4 billion, NOK 234 million (7.4%) higher than the figure at 30 June Equity rose by the profit for the period, less dividends disbursed and charitable donations. The Group s capital adequacy ratio (excl. profit for the period) at 30 June 2015 was 15.51%, compared with 14.20% at 30 June The core Tier 1 capital adequacy ratio was 13.38%, compared with 11.70% at 30 June If we include the profit for the period, less tax and a proportionate share of expected dividends and charitable donations, the core Tier 1 capital adequacy ratio at 30 June 2015 is estimated to 14.0%. The Bank s comprehensive income for the first half of 2015 gives an annualised return on equity of 10.2%, against 13.4% in the year-earlier period. RATING In May 2015 Moody s upgraded Sparebanken Sogn og Fjordane to a long-term rating of A2. Bustadkreditt Sogn og Fjordane s covered bond programme has a long-term rating of Aaa. CORRECTIONS TO FIGURES FOR PREVIOUS PERIODS Certain figures for 2013 and 2014 have been restated, because too high values had been reported on interest rate swaps. For further details see Note 1b. SUMMARY AND OUTLOOK Measured by comprehensive income the Bank put in a strong performance in the first half of 2015, albeit somewhat weaker than in the year-earlier period. That was primarily due to lower contributions from shares classified as available-for-sale, and from financial instruments. Net interest income rose by a robust 5.5%, but operating expenses also went up by 8.3%. Expenses rose more quickly than in the past due to heavy investment in new IT systems. Moreover, last year some IT expenses allocated in prior years were reversed, and adjusted for this expenses only rose by 5%. Excluding financial instruments, the cost-to-income ratio was 43.9%, against 42.4% last year. Deposits, loans and net interest income are all growing at a good rate, both in the retail and corporate banking markets, and we expect this to continue. Our capital adequacy ratio has risen over the past year, reaching 15.51%. The Board of Directors is satisfied with the Bank s performance in the first half of 2015, and the underlying performance of the banking business was in line with expectations. The Group has a satisfactory capital adequacy ratio, good customer margins and a strong market position in Sogn og Fjordane. The Group is in a good position to continue growing and developing. Førde, 11 August 2015 Hallgeir Kleppe Chair Randi Engen Deputy Chair Heidi Grande Røys Inge Jan Henjesand Trude Høgseth Felde Sindre Kvalheim Eirik Rostad Ness Arvid Andenæs CEO 6 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

7 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 7

8 Consolidated income statement Note Q Q Interest income Interest expenses Net interest income Commission income Commission expenses Net gains/losses on financial instruments Other income Net other operating income Total revenues Wages, salaries, etc Other expenses Depreciation and writedowns on fixed assets and intangible assets Total operating expenses Profit before loan impairment charge and net gain on fixed assets Loan impairment charge Profit/loss before taxation Tax expense Profit/loss for the reporting period COMPREHENSIVE INCOME Profit/loss for the reporting period Other comprehensive income Other items that may be reclassified subsequently to profit or loss, after tax Gain/loss on available-for-sale financial assets Other items that will never be reclassified to profit or loss, after tax Remeasurements, pensions Other comprehensive income for the period after tax Comprehensive income Note Figures for previous periods have been restated. For further details see Note 1b. 8 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

9 Consolidated balance sheet ASSETS Note Cash and receivables from central banks Loans and advances to credit institutions Loans to customers Commercial paper and bonds Shares Financial derivatives Investments in associates Intangible assets and goodwill Deferred tax assets Fixed assets Other assets Total assets DEBT AND EQUITY Debt to credit institutions Deposits from and debt to customers Financial derivatives Debt securities in issue Tax payable Other liabilities Provisions Subordinated/hybrid debt Total liabilities Equity certificates Dividend equalisation reserve Total equity share capital Primary capital certificates Total primary capital Reserve for unrealised gains Other equity Allocated for dividends and gifts Total equity Total debt and equity Note Figures for previous periods have been restated. For further details see Note 1b. Førde, 11 August 2015 Hallgeir Kleppe Chair Randi Engen Deputy Chair Heidi Grande Røys Inge Jan Henjesand Trude Høgseth Felde Sindre Kvalheim Eirik Rostad Ness Arvid Andenæs CEO Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 9

10 Consolidated cash flow statement Profit/loss before taxation Depreciation and writedowns Loan impairment charge Tax paid Other non-cash transactions Adjustment for other items A) Net cash flow from operating activities Reduction/increase in loans and advances to customers Reduction/increase in shares and interests in other enterprises Reduction/increase in investments in commercial paper and bonds Investments in fixed assets, intangible assets and goodwill B) Net cash flow from investment activities Increase/reduction in loans from credit institutions Increase/reduction in deposits from and debt to customers Increase/reduction in debt securities Increase/reduction in subordinated debt Dividends and gifts C) Net cash flow from financing activities D) Net cash flow during the year (A+B+C) Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents Breakdown of cash and cash equivalents Cash and receivables from central banks Deposits at other financial institutions Total Note Figures for previous periods have been restated. For further details see Note 1b. 10 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

11 Consolidated statement of changes in equity EQUITY SHARE CAPITAL Equity certificates Dividend equalisation reserve Primary capital Reserve for unrealised gains, available-for-sale shares Reserve for unrealised gains, other Other equity Allocated dividends, gifts and intra-group distributions Balance at Adopted dividends, gifts and intra-group distribution Profit/loss for the reporting period Other comprehensive income Balance at Total Balance at Adopted dividends, gifts and intra-group distribution Proposed allocation of profit/loss for the reporting period Other comprehensive income Balance at Balance at Adopted dividends, gifts and intra-group distribution Proposed allocation of profit/loss for the reporting period Other comprehensive income Balance at Note Figures for previous periods have been restated. For further details see Note 1b Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 11

12 Notes to the financial statements NOTE 1A ACCOUNTING PRINCIPLES AND CRITICAL ACCOUNTING ESTIMATES Basis of presentation Sparebanken Sogn og Fjordane s parent company and consolidated accounts have been prepared in accordance with international accounting standards (IFRS). These interim financial statements have been presented in accordance with IAS 34 Interim Financial Reporting. All figures are stated in millions of NOK, unless otherwise specified. General For more detailed information about accounting policies and for information about critical accounting estimates, please see Sparebanken Sogn og Fjordane s 2014 annual report on our website: NOTE 1B CORRECTIONS TO FIGURES FOR PREVIOUS PERIODS Through its internal controls, the Bank has revealed an error related to the values of interest rate swaps used in one-to-one hedging of bond issues. The error meant that, between 2013 and the first quarter of 2015, the Bank s valuation of these interest rate swaps was too high. This has now been corrected in the financial reports and notes for the prior periods. The error only affected the level of unrealised gains, and has not led to any losses being realised or in any incorrect decisions being made. The impact on the financial statements is shown on pages 13 and Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

13 NOTE 1B (cont.) CORRECTIONS TO CONSOLIDATED INCOME STATEMENTS FOR Q2 2014, H AND FULL-YEAR 2014 Q as previously reported Correction to Q Restated Q H as previously reported Correction to H Restated H as previously reported Correction to 2014 Restated 2014 Interest income Interest expenses Net interest income Commission income Commission expenses Net gains/losses on financial instruments Other income Net other operating income Total revenues Wages, salaries, etc Other expenses Depreciation and writedowns on fixed assets and intangible assets Total operating expenses Profit before loan impairment charge and net gain on fixed assets Loan impairment charge Profit/loss before taxation Tax expense Profit/loss for the reporting period COMPREHENSIVE INCOME Profit/loss for the reporting period Other comprehensive income Other items that may be reclassified subsequently to profit or loss, after tax Gain/loss on available-for-sale financial assets Other items that will never be reclassified to profit or loss, after tax Remeasurements, pensions Other comprehensive income for the period after tax Comprehensive income Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 13

14 NOTE 1B (cont.) RESTATED CONSOLIDATED BALANCE SHEET AT 30/06/2014, 31/12/2014 AND 01/01/2014 ASSETS Previously reported amount at Correction to amount at Restated balance sheet at Amount at given in 2014 annual report Correction to amount at Restated balance sheet at Amount at given in 2014 annual report Correction to amount at Restated balance sheet at Cash and receivables from central banks Loans and advances to credit institutions Loans to customers Commercial paper and bonds Shares Financial derivatives Investments in associates Intangible assets and goodwill Deferred tax assets Fixed assets Other assets Total assets DEBT AND EQUITY Debt to credit institutions Deposits from and debt to customers Financial derivatives Debt securities in issue Tax payable Deferred tax Other liabilities Provisions Subordinated/hybrid debt Total liabilities Equity certificates Dividend equalisation reserve Total equity share capital Primary capital certificates Total primary capital Reserve for unrealised gains Other equity Allocated for dividends and gifts Total equity Total debt and equity Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

15 NOTE 2 SEGMENT REPORTING Geographic segments All of the segments operate in Norway. General information about segments The segments reflect the organisation of the Group. Corporate banking market/public sector/financial sector offers a wide range of financial products and services, such as various types of financing, deposits, investments, insurances, foreign currency services and interest rate instruments to small and medium-sized enterprises, the public sector and financial sector Retail market including Bustadkreditt offers a wide range of financial products and services, such as various types of financing, deposits, investments, insurances, foreign currency services and interest rate instruments to retail customers Finance responsible for financing and for managing liquidity Other supplies services to Sparebankstiftinga Sogn og Fjordane and manages various properties Estate agency offers estate agency services in conjunction with the purchase and sale of properties Property management manages the Group s largest properties INCOME STATEMENT H Total for group Finance Corp. Market/ PS/FS Retail market including Bustadkreditt Other Estate agency Property management Fjellvegen Eigedom AS Eliminations Net interest and commission income Net other operating income Total operating income Operating expenses Profit/loss before loan impairment charge Net gain on fixed assets Loan impairment charge Profit/loss before taxation BALANCE SHEET AT Net loans and advances to customers Other assets Total assets Deposits from and debt to customers Other liabilities Equity (incl. profit/loss for the period) Total debt and equity Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 15

16 NOTE 2 SEGMENT REPORTING (cont.) INCOME STATEMENT H Total for group Finance Corp. Market/ PS/FS Retail market including Bustadkreditt Other Estate agency Property management Fjellvegen Eigedom AS Eliminations Net interest and commission income Net other operating income Total operating income Operating expenses Profit/loss before loan impairment charge Net gain on fixed assets Loan impairment charge Profit/loss before taxation BALANCE SHEET AT Net loans and advances to customers Other assets Total assets Deposits from and debt to customers Other liabilities Equity (incl. profit/loss for the period) Total debt and equity Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

17 NOTE 2 SEGMENT REPORTING (cont.) 2014 INCOME STATEMENT Total for group Finance Corp. Market/ PS/FS Retail market including Bustadkreditt Other Estate agency Property management Fjellvegen Eigedom AS Eliminations Net interest and commission income Net other operating income Total operating income Operating expenses Profit/loss before loan impairment charge Net gain on fixed assets Loan impairment charge Profit/loss before taxation BALANCE AT Net loans and advances to customers Other assets Total assets Deposits from and debt to customers Other liabilities Equity (incl. profit/loss for the period) Total debt and equity Note Figures for previous periods have been restated. For further details see Note 1b. Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 17

18 NOTE 3 OTHER OPERATING INCOME NET COMMISSION INCOME Payment services Security trading Guarantee commissions Currency services and international payments Insurance services Other commission income Total charges and commission income Interbank fees Payment services Total commission expenses Net commission income NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS Net gains/losses on foreign currency Net gains on financial derivatives Net gains/losses on financial instruments, trading portfolio Net gains/losses on loans measured at fair value Net gains/losses on deposits measured at fair value Net gains/losses on commercial paper and bonds Net gains/losses on shares Net gains/losses on financial liabilities Net gains/losses on financial instruments designated at fair value Net gains/losses on financial instruments measured at fair value OTHER INCOME Income from property Estate agency Other operating income Total other income TOTAL NET OTHER OPERATING INCOME Note Figures for previous periods have been restated. For further details see Note 1b. 18 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

19 NOTE 4 LOAN IMPAIRMENT CHARGE Increase/reduction in individually assessed impairment provisions Increase/reduction in collectively assessed impairment provisions Losses realised during the period for which impairment provisions had previously been made Losses realised during the period for which impairment provisions had not previously been made Recoveries against previous years realised losses = Loan impairment charge for the period NOTE 5 IMPAIRMENT PROVISIONS Individually assessed impairment provisions at the start of the period New ind. ass. provisions against previously impaired loans Release of individually assessed provisions from past periods Loan loss provisions against previously unimpaired loans Losses realised for which individually assessed provisions had been made Change in amortisation adjustment on balance sheet Individually assessed impairment provisions at the end of the period Collectively assessed impairment provisions at start of period Change in collectively assessed provisions for the period Collectively assessed impairment provisions at end of period Total impairment provisions at end of period NOTE 6 LOANS IN DEFAULT AND AT RISK OF DEFAULT Loans in default Loans more than 90 days in arrears Individually assessed impairment provisions Net loans in default Coverage ratio 19 % 15 % 4 % Other loans at risk of default Loans at risk of default (not in default) Individually assessed impairment provisions Net other loans at risk of default Coverage ratio 38 % 60 % 32 % Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 19

20 NOTE 7 LOANS TO CUSTOMERS BY SECTOR AND INDUSTRY Wage and salary earners, pensioners Public sector Farming and forestry Fishing and hunting Fish farming and hatcheries Industry and mining Electrical power Building and construction Commerce Transport Hotels/tourism Services Property management Other TOTAL Of which: Retail Corporate market Public sector/other Gross loans to customers NOTE 8 CUSTOMER DEPOSITS BY SECTOR AND INDUSTRY Wage and salary earners, pensioners Public sector Farming and forestry Fishing and hunting Fish farming and hatcheries Industry and mining Electrical power Building and construction Commerce Transport Hotels/tourism Services Property management Other TOTAL Of which: Retail Corporate market Public sector/other Gross loans to customers Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

21 NOTE 9 DEBT SECURITIES IN ISSUE FACE VALUE CARRYING AMOUNT Bonds in issue own bonds, not amortised Debt securities measured at amortised cost Commercial paper and other short-term borrowings Bonds in issue own bonds, not amortised Debt securities in issue, designated at fair value Total debt securities in issue MATURITY STRUCTURE OF DEBT SECURITIES (FACE VALUE) Total debt securities in issue (face value) New borrowings in Repayments in Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 21

22 NOTE 10 CAPITAL ADEQUACY EQUITY AND SUBORDINATED DEBT Equity share capital The Bank s own funds/primary capital certificates Dividend equalisation reserve Allocated dividends/intra-group distributions Reserve for unrealised gains Other equity Share of interim profit/loss Equity Other core capital Hybrid capital Deductions Deferred tax assets Other intangible assets Other deductions Ownership interest in other financial institutions/ Unrealised gains on available-for-sale shares Net core capital Core Tier 1 capital Supplementary capital Unrealised gains on shares, ownership interests and primary apital certificates classified as available for sale Subordinated debt Ownership interests in other financial institutions Net supplementary capital Net equity and subordinated loan capital BASIS FOR CALCULATION Credit risk Local and regional authorities Institutions Enterprises Retail loans Residential mortgage loans Overdue advances High-risk advances Covered bonds Other advances Total calculation basis for credit risk Currency risk Operational risk CVA 4 Other deductions Total calculation basis Excess equity and subordinated debt CAPITAL ADEQUACY Capital adequacy ratio 15,51 % 14,20 % 15,45 % Core capital adequacy ratio 13,38 % 13,08 % 13,23 % Core Tier 1 capital adequacy ratio 13,38 % 11,70 % 13,23 % Unweighted core capital ratio 6,66 % 6,91 % Note Figures for previous periods have been restated. For further details see Note 1b. 22 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

23 NOTE 11 TRANSACTIONS WITH RELATED PARTIES Agreements and transactions between the parties have been made on market terms, as if they had been agreed between two totally independent parties. In the consolidated financial statements, transactions between the parent and its subsidiaries have been eliminated. NOTE 12 EQUITY CERTIFICATES PARENT COMPANY NOK 000S At 30 June 2015, the Bank s equity share capital consisted of 18,949,530 equity certificates with a face value of NOK 100. Equity share capital ratio Equity certificates Dividend equalisation reserve Total equity share capital (A) Primary capital (B) Reserve for unrealised gains Allocated dividends and gifts Other equity Total equity Equity share capital ratio A / (A+B) 87,83 % 87,83 % 87,83 % Dividends Dividend allocated per equity certificate (in whole NOK) 0, , ,31754 Total dividends (recognised as a liability) Number of % share % share % share Owners of equity certificates equity certificates Sparebankstiftinga Sogn og Fjordane ,12 % 94,12 % 94,12 % Sparebankstiftinga Fjaler ,88 % 5,88 % 5,88 % Total ,00 % 100,00 % 100,00 % Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 23

24 NOTE 13 FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST Consolidated Carrying amount Fair value Carrying amount Fair value Cash and receivables from central banks Loans and advances to credit institutions Loans to customers Total financial assets Debt to credit institutions Customer deposits Debt securities in issue Total financial liabilities CLASSIFICATION BY LEVEL Assets and liabilities that are measured at fair value, whether this is because they are part of the trading portfolio, were initially recognised at fair value or are held as available for sale, shall be classified according to how reliable the fair value estimate is. There are three classification levels: Level 1: Prices quoted in active markets Level 2: Valuation is directly or indirectly based on observable prices for similar assets Level 3: Valuation is not based on observable prices, and instead relies on e.g. our own valuation models Consolidated Assets at Level 1 Level 2 Level 3 Total Loans and advances to customers, designated at fair value Interest-bearing securities, designated at fair value Shares, designated at fair value Shares, available for sale Derivatives, trading portfolio Liabilities at Deposits from and debt to customers, measured at fair value Debt incurred through the issue of securities, measured at fair value Derivatives, trading portfolio Breakdown of fair value, level 3 Consolidated Financial assets Financial liabilities At Loans to customers Shares Customer deposits Nominal value/cost Fair value adjustment Total fair value, excluding accrued interest Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

25 Breakdown of changes in financial instruments measured at fair value, level 3 Financial assets Financial liabilities Consolidated Loans to customers Shares Customer deposits Carrying amount at Net gains/losses on financial instruments through profit or loss Net gains/losses on financial instruments through OCI Acquisitions over the period Sales/redemptions over the period Transferred from level 1 or Transferred to level 1 or Other Carrying amount at There were no moves between levels 1, 2 and 3 in the second quarter of Loans to customers and customer deposits measured at fair value comprise fixed-rate loans and deposits. The purchases or sales/redemptions shown for the period represent the net change excluding changes in market value. Fixed-rate deposits and fixed-rate loans are valued based on discounted cash flows. The discount rate that we use is supposed to represent the interest rate on an equivalent new product issued at the reporting date, with the same term and cash flow. In order to calculate that interest rate, we use our own model for those products, which is not an observable value to outsiders. Sensitivity analysis, level 3 For fixed-rate deposits the average remaining term is approx years. Roughly speaking, a 1% fall in interest rates will reduce the value of our fixed-rate deposits by approx. NOK 0.4 million. For fixed-rate loans the weighted average remaining term is approx. 3.4 years. The discount rate depends on the remaining term of the loan. At 30 June 2015, the discount rate for loans with a remaining term of three years is 1.75%. Roughly speaking, a 1% rise in the discount rate will reduce the value of our fixed-rate loans by approx. NOK million. Shares defined as level 3 assets are not listed on a stock exchange, have no known transactions and are shares for which the Bank has no observable assets that can be used for valuation purposes. In such cases we use our own valuations based on discounted cash flows or key financial ratios such as the price to book ratio. For companies valued using the price to book ratio, a ratio of has been applied. For companies valued using a cash flow model, a required rate of return of 8.74% has been used, equivalent to a 7.55% premium over the risk-free interest rate. For example, a 10% reduction in the price to book ratio and a 1 percentage point increase in the required rate of return would cut the value by approx. NOK 12.5 million. Method used to calculate fair value of financial instruments For more information about how the fair value of financial instruments is calculated, please see our 2014 annual report. NOTE 14 OFF BALANCE SHEET ITEMS Guarantees Payment guarantees Contract guarantees Other guarantee liabilities Commitments to investments in shares Total in NOK Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 25

26 Declaration by the Board of Directors and CEO We declare that, to the best of our knowledge, the financial statements for the first six months of 2015 have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the EU, and that the information contained therein provides a true picture of the assets, liabilities, financial position and results of the parent company and Group at 30 June The Board believes that the report gives a true representation of the most important events that occurred during that period, explaining their impact on the financial statements, and that it gives an assessment of the most important areas of uncertainty and potential risks faced by the Bank in the next accounting period. Førde, 11 August 2015 Hallgeir Kleppe Chair Randi Engen Deputy Chair Heidi Grande Røys Inge Jan Henjesand Trude Høgseth Felde Sindre Kvalheim Eirik Rostad Ness Arvid Andenæs CEO 26 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

27 Income statement, parent company Note Interest income Interest expenses Net interest income Commission income Commission expenses Net gains/losses on financial instruments Other income Net other operating income Total revenues Wages, salaries, etc Other expenses Depreciation and writedowns on fixed assets and intangible assets Total operating expenses Profit before loan impairment charge and net gain on fixed assets Loan impairment charge Profit/loss before taxation Tax expense Profit/loss for the reporting period COMPREHENSIVE INCOME Profit/loss for the reporting period Other comprehensive income Other items that may be reclassified subsequently to profit or loss, after tax Gain/loss on available-for-sale financial assets Other items that will never be reclassified to profit or loss, after tax Remeasurements, pensions Other comprehensive income for the reporting period, after tax Comprehensive income Note Figures for previous periods have been restated. For further details see Note 1b. Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 27

28 Balance sheet, parent company ASSETS Cash and receivables from central banks Loans and advances to credit institutions Loans to customers Commercial paper and bonds Shares Financial derivatives Investments in associates Investments in subsidiaries Intangible assets and goodwill Deferred tax assets Fixed assets Other assets Total assets DEBT AND EQUITY Debt to credit institutions Deposits from and debt to customers Financial derivatives Debt securities in issue Tax payable Other liabilities Provisions Subordinated/hybrid debt Total liabilities Equity certificates Dividend equalisation reserve Total equity share capital Primary capital certificates Total primary capital Reserve for unrealised gains Other equity Allocated for dividends and gifts Total equity Total debt and equity Note Figures for previous periods have been restated. For further details see Note 1b. 28 Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited)

29 Consolidated income statement As a % of average total assets Interest income 3,68 % 4,23 % 4,14 % Interest expenses 1,97 % 2,49 % 2,39 % Net interest income 1,72 % 1,74 % 1,75 % Commission income 0,23 % 0,25 % 0,25 % Commission expenses 0,03 % 0,03 % 0,03 % Net gains/losses on financial instruments 0,05 % 0,01 % 0,15 % Other income 0,08 % 0,08 % 0,08 % Net other operating income 0,22 % 0,29 % 0,45 % Total revenues 1,93 % 2,02 % 2,19 % Wages, salaries, etc. 0,47 % 0,46 % 0,47 % Other expenses 0,35 % 0,35 % 0,34 % Depreciation and writedowns on fixed assets and intangible assets 0,05 % 0,06 % 0,06 % Total operating expenses 0,87 % 0,86 % 0,88 % Profit before loan impairment charge and net gain on fixed assets 1,06 % 1,16 % 1,32 % Loan impairment charge 0,06 % 0,07 % 0,18 % Profit/loss before taxation 1,00 % 1,08 % 1,14 % Tax expense 0,29 % 0,29 % 0,27 % Profit/loss for the reporting period 0,71 % 0,80 % 0,87 % COMPREHENSIVE INCOME Profit/loss for the reporting period 0,71 % 0,80 % 0,87 % Other comprehensive income Other items that may be reclassified subsequently to profit or loss, after tax Gain/loss on available-for-sale financial assets 0,06 % 0,19 % 0,03 % Other items that will never be reclassified to profit or loss, after tax Remeasurements, pensions 0,00 % 0,00 % 0,08 % Other comprehensive income for the period after tax 0,06 % 0,19 % 0,11 % Comprehensive income 0,77 % 0,99 % 0,76 % AVERAGE TOTAL ASSETS Note Figures for previous periods have been restated. For further details see Note 1b. Sparebanken Sogn og Fjordane INTERIM REPORT Q (unaudited) 29