Annual Report 2012 Gjensidige Bank Boligkreditt AS
Contents
Page The Board's Report for Gjensidige Bank Boligkreditt AS
3
Income statement
6
Statement of comprehensive income
6
Balance sheet
7
Statement of changes in equity
8
Statement of cash flow
9
Notes 1. Accounting policies
10
2. Critical accounting estimates and judgements
13
3. Segment Information
13
4. Net interest income
14
5. Operating expenses
14
6. Write-downs and losses on loans
17
7. Tax expenses
17
8. Intangible assets
18
9. Other Assets
18
10. Loans to and receivables from credit institutions
18
11. Analysis of loans
19
12. Interest bearing securities
19
13. Impairment of loans
20
14. Debt to credit institutions
20
15. Debt incurred through the issue of securities
20
16. Other liabilities
21
17. Off-balance sheet commitments and contingent liabilities
21
18. Classification of financial instruments
22
19. Maturity analysis of assets and liabilities
23
20. Loan to value ratio and security mass
24
21. Transactions with related parties
25
22. Capital adequacy
26
23. Risk
27
24. Credit risk
28
25. Liquidity risk
31
26. Sensitivity analysis
31
Other information
2
Declaration from the board of directors and CEO
32
Auditor’s declaration
33
Statement by the control committee
35
Gjensidige Bank Boligkreditt – Annual Report 2012
The Board's Report for Gjensidige Bank Boligkreditt AS
Business Gjensidige Bank Boligkreditt AS was established in the spring of 2009 and later that year received a license from the Financial Supervisory Authority of Norway for the establishment of a residential mortgage company able to issue covered bonds. The Company has its head office in Oslo and office in Førde. Gjensidige Bank Boligkreditt AS is a wholly owned subsidiary of Gjensidige Bank ASA. Gjensidige Bank ASA is a wholly owned subsidiary of Gjensidige Bank Holding AS, which in turn is a wholly owned subsidiary of Gjensidige Forsikring ASA. The Company’s mission is to provide and/or acquire residential mortgages, commercial mortgages, loans secured by mortgages on other real property or public loans and to fund lending activities, primarily by issuing covered bonds. At the close of 2012, the Company only had residential mortgage loans. In 2012 the established loan program was assigned AA + rating from the rating agency Standard & Poor's. By the end of 2012 the Company had issued covered bonds with a total face value of NOK 5.5 billion. The maturity of these bonds varies from 8 months to 6 years and 4 months. The bonds are placed in the market and on the parent Company’s balance sheet. Services such as customer support and loan management as well as day-to-day management and administrative services are provided by Gjensidige Bank ASA and Gjensidige Forsikring ASA. At the close of 2012 the Company had 5,630 mortgages with a total outstanding balance of NOK 7.2 billion. The Company’s loan portfolio is of high quality, and none of the loans are in default. The weighted average loan-to-value ratio was 51.8 per cent. The Company does not carry out any research and development (R&D) activities.
Comments on the annual accounts Profit and loss accounts The financial statements have been prepared in accordance with IFRS (International Financial Reporting Standards). In addition, requirements in accordance with the Accounting Act and associated regulations are followed. Last year's figures are given in brackets. In accordance with the requirements in Norwegian accounting legislation, the Board confirms that the prerequisites have been met for preparation of the accounts under the assumption that the Company will continue as a going concern and that the annual accounts have been prepared under this assumption. In 2012 the Company made a profit after tax expense of NOK 27.2 million (8.4 million). The main reasons for the improvement were higher volumes and improved margins. Net interest income for 2012 amounted to NOK 47.6 million (16.5 million). The reason for the improvement compared to 2011 was higher volumes and improved margins. Annualised net interest income in per cent of average total assets was 0.88 per cent (0.57). The reason for the improvement was improved margins. In 2012, operating expenses totalled NOK 7.8 million (4.3 million), or 15.4 per cent (25.1) of total operating income for the year. The increase was mainly due to the rating of the Company.
Write-downs and losses The Company uses the banking Group’s guidelines for assessing and writing down losses on loans. In 2012 there was a NOK 4.7 million (1.1 million) expense for write-downs of loans. Group write-downs on the balance sheet at the close of the year amounted to NOK 7.3 million (2.6 million). The Company’s total write-downs represented 0.1 per cent of average gross lending at the end of the year which was entirely comprised of group write-downs (no individual write-downs). At the end of the year the Company had no loan in default over 90 days. The write-down is assessed to be sufficient.
Balance sheet The Company’s total assets has increased in parallel with the loan portfolio, and amounted to NOK 7.9 billion (3.8 billion) at the end of 2012. The Company borrows money mainly by issuing covered bonds. Lending At the end of 2012, gross lending totalled NOK 7.2 billion (3.6 billion) of which 47.3 per cent was loans with credit lines (flexilån). The whole portfolio had been purchased from Gjensidige Bank ASA. The portfolio consists of loans with adjustable interest rates. The average loan commitment was just above NOK 1.2 million. There was no single exposure above NOK 8.0 million. The loan portfolio had an average loan-to-asset value ratio of 51.8 per cent at the end of 2012. Funding At the end of 2012 the Company had issued covered bonds with a total face value of NOK 5.5 billion. Out of this NOK 4.3 billion was placed in the market while Gjensidige Bank ASA holds NOK 1.2 billion. Gjensidige Bank ASA has used NOK 249.0 million in the swap arrangement with Norges Bank (the central bank of Norway). The Company issued covered bonds totalling NOK 2.2 billion during the year, out of which Gjensidige Bank ASA owns NOK 350,0 million. At the turn of the year, the Company’s mortgages amounted to 143.8 per cent of the covered bonds issued. Liquidity At the end of 2012 Gjensidige Bank Boligkreditt AS had net liquid assets of NOK 733.2 million (217.4 million), divided between NOK 245.2 million (217.4 million) in bank deposits, NOK 90.8 million (0 million) in covered bonds and NOK 397.2 million (0 million) in certificates. The Company had a long-term credit facility of up to NOK 1.0 billion, as well as short-term vendor financing of up to NOK 1.5 billion. Unutilised credit facilities amounted to NOK 429.1 million at the end of the year. The liquidity situation is considered good. Capital adequacy and equity The Company’s equity at the close of the year was NOK 333.6 million (236.4 million) representing 4.2 per cent of average total assets. The capital was increased by NOK 70.0 million on 2012. The core capital was NOK 333.5 million (235.9 million) and the capital ade-
Gjensidige Bank Boligkreditt – Annual Report 2012
3
quacy ratio was 11.4 per cent (16.5 per cent). The figure for equity and subordinated loan capital includes the profit for 2012.
The board has set contingency plans for managing liquidity- and capital crisis.
Based on the Company's activity, the Board is of the opinion that the Company's equity and capital adequacy are satisfactory and acceptable.
Interest rate risk
Key risk and uncertainty factors Risk is defined as the possibility that an event can affect the Company’s achievement of its objectives. Thus, in order to understand and manage risk, we assess both the probability that the event will occur and the consequences of that event. Risk management is based on established objectives and strategies, as well as the framework for risk exposure set by the board. Through the group’s risk management and internal control, a structure is established that identifies, assesses, calls attention to and manages risk throughout the whole group in a systematic way. The primary responsibility for good risk management and internal control is vested in the CEO and all managers and employees in the operational units that provide services to the Company, by performing the work in keeping with the authority, rules of procedure and guidelines that are incumbent on the individual. The group and individual companies shall have moderate risk profiles, and there shall be no single event capable of seriously harming the Company’s financial position. A risk management function has been established at corporate level, responsible for overseeing the Group's risk management system, and to have an overview of the risks the Group is or may be exposed to. The risk management function should ensure that management and the Board at all times are adequately informed about the Group's risk profile.
Financial risk The Company’s financial risk mainly comprises credit, liquidity and interest rate risk. Risk is reported monthly in accordance with the principles, strategies and limits on risk adopted by the Board. Credit risk The Company’s credit risk represents the risk of losses arising from customers or other counterparties failing to repay their debts when they are due. The Company uses risk classification models to calculate the risk associated with its exposure to customers. It only provides loans secured with a residential mortgage. The first loans from Gjensidige Bank ASA were transferred in September 2009. Since then, house prices have risen. Gjensidige Bank ASA services the Company’s loan portfolio, and monitors it closely. Losses are considered satisfactory and the risk associated with the portfolio is considered low. Liquidity risk Liquidity risk is the risk that the bank will be unable to meet all of its financial obligations when they are due, or be unable to finance the assets, including the desired growth without significant additional costs. The Board has set limits on liquidity risk. The Company shall have available a liquidity buffer made up of short-term deposits, liquid securities and/or committed credit facilities which provides a reasonable amount of time to make the necessary adjustments in the event of an acute liquidity freeze. The company shall keep a low liquidity risk.
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Gjensidige Bank Boligkreditt – Annual Report 2012
Interest rate risk is the risk that equity will fall in value as a result of unexpected changes in general interest rate levels. Any such change in interest rate levels may lead to the market value of assets with fixed interest periods falling. Alternatively, the market value of fixed interest debt/liabilities may increase. The Company’s exposure to general interest rate levels is low in relation to its core capital. There are no fixed interest loans in the portfolio, and all of the bonds issued are subject to variable interest rates. The Company has set limits on interest rate level risk, which are monitored and reported monthly. The company has no derivative agreements at 31. December 2012.
Operational risk Operational risk is the risk of loss due to weaknesses or errors in processes and systems, errors committed by employees, or external events. To reduce risk, the group focuses on organising its activities with well-defined and clear lines of reporting and responsibility. Fixed procedures have been established for the execution of risk assessment, and each year the Board considers the status of the established internal control system. An independent compliance function has been established in the group to help ensure that it does not incur government sanctions, financial losses or loss of reputation as a result of noncompliance with laws, rules and standards. The compliance function identifies, assesses, gives advice on, monitors and reports the group’s risk arising from laws, regulations and internal guidelines not being met. Employees who use the Company’s IT systems have to sign a special declaration on procedures for their use.
Internal control and risk management related to financial reporting The CEO of the Company approves all expenses. Expenses for the CEO are approved by the chairman of the board. The Company follows Gjensidiges guidelines when preparing the quarterly and annual financial statements.
Ownership and governance The group follows the Norwegian code of corporate governance, and the Company has adapted this in all areas as far as possible. Also see the information on www.gjensidige.no. There is a particular emphasis on the composition of governing bodies, the responsibilities of the Board, communication and information, and risk management and auditing. The Board of Gjensidige Bank Boligkreditt AS has approved ethical rules which are available through the group’s intranet. The Articles of Association, instructions and corporate governance systems establish a clear division of roles and responsibilities at the Company.
Governing body Supervisory board The Supervisory Board is composed of 15 members and 6 deputy members and shared by Gjensidige Bank ASA, Gjensidige Bank Boligkreditt AS and Gjensidige Bank Holding AS. The Supervisory
Board shall monitor the Board and CEO’s administration of the Company and ensure that its objects are promoted in accordance with legislation, the Articles of Association and the decisions of the General Meeting and the Supervisory Board.
Working environment There is one employee in the Company, and the working environment is considered to be good. The Company had no sick leave in 2012.
Control committee Every two years, the General Meeting elects a control committee composed of three members and one deputy member. One of the members satisfies the requirements that apply to judges, cf. the second sub-section of Section 54 of the Courts of Justice Act of 13 August 1915. This member also needs to be approved by the Financial Supervisory Authority of Norway. The control committee shall supervise the Company’s activities, and amongst other things check that its operations comply with relevant legislation and the Articles of Association. The control committee is shared by Gjensidige Bank ASA, Gjensidige Bank Boligkreditt AS and Gjensidige Bank Holding AS.
There were no personal injuries, property damage or accidents at the Company in 2012.
Equal opportunity There are two men and two women on the Board. The CEO is a man. The Board and management take a proactive approach to promoting equal opportunity at the Company. The Company follows the group’s guidelines and regulations relating to corporate social responsibility, including those that relate to discrimination/ diversity and ethics.
The environment
The Board The Board is composed of four members elected by the Supervisory Board. Members are elected for two years at a time. One of the Board members is not an employee of the Gjensidige group. The Board supervises the management of the Company’s affairs, and shall ensure that its operations are organised in a satisfactory manner, which includes ensuring that its bookkeeping and asset management are properly audited. There has been no change to the Board in 2012. External auditor
The Company’s operations result in minimal pollution of the environment. Internal environmental measures focus on energy economising, reducing travel through increased use of videoconferencing, standardised printers and copiers that print on both sides of the paper, and responsible waste management.
Strategy and outlook for 2013 In 2013 Gjensidige Bank Boligkreditt AS will continue to help ensure that Gjensidige Bank ASA has a diversified funding base. The Company will constantly look at the possibility of issuing further covered bonds, depending on the state of financial markets and the collateral available to the Company.
KPMG has been chosen as the Company’s external auditor, and acts as its independent inspector, cf. Section 2-34 of the Financial Institutions Act.
Focus areas for the Company will be requirements from the rating agency and authorities as well as monitoring the development in the loan marked and the loans in default.
Internal auditor
Events after the balance sheet date
The internal auditor shall help reassure the Board and the management that the Company has appropriate and effective processes for risk management, internal control and corporate governance. The internal auditor reports to the Board.
The Board is not aware of any events after the end of the financial year that have a material impact on the financial statements presented.
Gjensidige’s corporate audit unit acts as the Company’s internal auditor.
Allocation of profit Gjensidige Bank Boligkreditt AS made a profit after tax of NOK 27.2 million. The Company's profit before other comprehensive income is proposed allocated to other equity. After allocation free equity amounts to NOK 43.5 million.
Oslo, 5. March 2013 The Board of Gjensidige Gj ge Bank Boligkreditt gkr tt AS
Jørgen Ringdal
Erik Ranberg
Gro Tønder
Chairman of the Board
Solbjørg Lie
Jan Kåre Raae CEO
Gjensidige Bank Boligkreditt – Annual Report 2012
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Statement of changes in equity
NOK thousand Equity 1.1.2011 New equity 2011
Share capital
Share premium account
Total paid-up equity
130,000
20
130,020
13,000
77,000
90,000
Profit/ (loss) for the period 1.1.-31.12.2011
Other equity 7,946
Total equity 137,966 90,000
8,428
8,428
8,428
8,428
Other profit/ loss components Profit/ (loss) for the period 1.1.-31.12.2011 Equity 31.12.2011
143,000
77,020
220,020
16,374
236,394
Equity 1.1.2012
143,000
77,020
220,020
16,374
236,394
13,000
57,000
70,000
New equity 2012 Profit/ (loss) for the period 1.1.-31.12.2012
70,000 27,238
27,238
27,238
27,238
43,612
333,632
Other profit/ loss components Profit/ (loss) for the period 1.1.-31.12.2012
8
Equity 31.12.2012
156,000
Number of shares at the end of the period
130,000
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
134,020
290,020
Statement of cash flow
NOK thousand
1.1.-31.12.2012
1.1.-31.12.2011
Cash flows from operating activities Net payment of loans to customers Payment of interest from customers Net payment of interest from credit institutions etc. Taxes payed Net other commission income Payment to operations Net paid/received upon purchase and sale of financial instruments and interest-bearing securities Net cash flow from operating activities
(3,640,830)
(1,191,466)
178,675
96,312
4,838
4,454
(3,385)
(2,896)
2,096
507
(6,873)
(3,632)
(487,336) (3,952,815)
(1,096,722)
Net paid(-)/received when taking loans from credit institutions, bonds and certificates
4,039,647
1,237,315
Net payment of interest on financing activities
(132,376)
(79,889)
3,402
(3,520)
70,000
90,000
3,980,672
1,243,906
27,857
147,185
Cash and cash equivalents 1.1.
217,362
70,177
Cash and cash equivalents 31.12.
245,218
217,362
27,857
147,185
Investment activities Net purchase of intangible assets and fixed assets Net cash flow from investing activities Financing activities
Net paid(-)/received for other short-term positions Paid-up equity Net cash flow from financing activities Total cash flow Cash flow for the year
Net payment made(-)/received of cash Specification of liquid assets Deposits with financial institutions
245,218
217,362
Liquid assets in statement of cash flow
245,218
217,362
The cash flow statement shows inflows and outflows of cash and cash equivalents over the course of the year. The statement is adjusted for items that do not result in cash flows, such as provisions, depreciation and writedowns on loans and guarantees. The cash flows are classified as operating activities, investing activities or financing activities. Cash is defined as cash and receivables from central banks and credit institutions.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
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Notes
1. Accounting policies
Other operating income
General
Other operating income that are not related to any of the other lines of income are generally recognised when the transaction has been completed.
Gjensidige Bank Boligkreditt AS was established in 2009 and is owned by Gjensidige Bank ASA. The Company is domiciled in Norway. The Company’s head office is located at Drammensveien 288, Oslo, Norway. The Company issues covered bonds. All amounts in accounts and notes are stated in thousands of Norwegian kroner unless otherwise stated. The Company's presentation currency is in Norwegian kroner. In accordance with the accounting regulations for banks, finance companies etc. the financial statements are prepared in line with simplified IFRS (International Financial Reporting Standards), taking into account the limitations of accounting regulations § 1 -5.
Changes in the accounting policies As a main rule, all income and expenses shall be shown in the income statement. The exception to this rule is the effect of changes to accounting principles. In the event of fundamental accounting reforms/changes in accounting policies, figures for previous years must be recalculated to allow comparisons. If items in the financial statement are reclassified, comparative figures must be calculated for the previous periods and be reported in the financial statements. New and changed standards being used by the group The IFRS and interpretations that have been released until 5 March 2013, the use of which is not mandatory as at 31 December 2012; i.e. IFRS 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13, IAS 27, IAS 28, and amendments to IAS 12, IAS 32, IFRS 1 and IFRS 7 is expected, based on assessments made so far, not to have a significant impact on reported figures.
Principles for recognising income and expenses Net interest income Interest rate revenue and expenses are calculated and recognised based on the effective interest rate method. The calculation takes into account establishment fees and direct marginal transaction costs that are an integral part of the effective interest rate. Interest is recognised in profit or loss using the internal rate of return method both for balance sheet items that are measured at amortised cost and ones that are measured at fair value through the income statement. Interest income on write-downs on commitments is calculated as internal interest rates of the written down value. Also see: "Value calculation of fair value" and "Value calculation of amortised cost". Commission income and expenses The way in which commission income from various customer services is recognised depends on the nature of the commission. Fees are recognised as income when the services are delivered or a significant part of the service has been completed. Fees received for completed services are recognised as income in the period the services were performed. Commissions received as payment for various tasks are recognised as income once then service has been completed. Commission costs are transactionbased and are recognised in the period the services were received.
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Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
Operating expenses Operating expenses are accrued and expensed in the relevant accounting period.
Currency The Company and Group's presentation currency and functional currency are Norwegian kroner. Transactions involving the purchase and sale of foreign currency denominated securities and financial instruments are translated into NOK using the exchange rate on the date of the purchase/ sale. The holdings of foreign securities and financial documents are valued in Norwegian kroner according to the exchange rate on the balance sheet day. Cash and cash equivalents are also valued at the exchange rate on the balance sheet date.
Segments Gjensidige Bank Boligkreditt AS has only one business segment and that is lending to private customers. This segmentation best reflects the way the business is run by the management.
Inclusion of non-financial assets on the balance sheet Assets and liabilities are included on the Bank’s balance sheet when the Bank obtains real control over rights to the assets or assumes real obligations. Assets are derecognised at the time the actual risk related to the assets has been transferred and the control of the rights to the assets has ended or expired.
Fixed assets Fixed assets consist of fixtures, machinery and IT-systems that are used within the company. Fixed assets are valued at the cost of acquisition with accumulated depreciations and write-downs. They are depreciated on a straight line basis over their anticipated useful life. Where operating assets or significant parts of an operating asset have different lifespan, these are capitalised and depreciated separately. Unless it is insignificant the expected usable lifespan and the residual value is reviewed annually. The carrying value of an asset is written down if its recoverable amount is less than its carrying value.
Intangible assets Intangible assets, whether acquired separately or as a group, are carried on the balance sheet at the cost of acquisition. Intangible assets include customised software developed by the Bank. This is carried on the balance sheet at its historical cost plus the costs of readying the software for use, less accumulated depreciations and any write-downs. When capitalising the carrying amount of new intangible assets, the probability of the financial benefits accruing to the company from the asset must be demonstrated. Additionally, it must be possible to reliably estimate the cost of the asset. Capitalised software expenses are depreciated across its expected useful lifespan, which normally is three years. The depreciation period and method is assessed annually. An evaluation is made of the need for write-downs when there are indications of impairment, and written down if the recoverable amount is lower than the carrying amount.
Direct costs include expenses for employees who are directly involved in software development, materials and a number of relevant administrative expenses (overhead expenses). Expenses connected to the maintenance of software and IT systems are recognised directly in profit or loss.
Impairment of non-financial assets The Company reviews the carrying value for assets and identifiable intangible assets annually or more frequently if there are occurrences or changes in the assumptions that indicate that the carrying value is irrecoverable. Indicators that are assessed as significant by the company and that can trigger testing for impairment include: • A significant drop in profitability in relation to past or expected future profitability • Significant changes in the company’s use of assets or overall strategy for its activities • Significant downturn for the industry or the economy Previous impairment losses, except for goodwill, will be reversed if the assumptions for the impairments no longer exist. Impairment losses are only reversed to the extent that the new carrying value does not exceed what would have been the carrying value after depreciation at the time of the reversal if there had been no impairment.
Financial instruments Recognition and derecognition Financial assets and liabilities are recognised in the balance sheet when the Company becomes a party to the instrument’s contractual terms. Ordinary purchases and sales of financial instruments are recognised on the transaction date. When a financial asset or a financial liability is initially recognised (asset/liability that does not have fair value through profit or loss), it is measured at fair value plus transaction costs that are directly related to the purchase or issue of the financial asset or liability.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed payments or determinable payments. Loans and receivables are initially recognised at fair value, and thereafter at amortised cost using the effective interest rate method. When calculating the effective interest rate, cash flows are estimated and all the contractual terms of the financial instruments are taken into account. On each balance sheet day loans and receivables are reviewed to determine if there is objective evidence that a receivable/loan or a group of receivables/loans have been impaired. Individual write-downs are made first, before determining any group writedowns. If there is objective evidence that a financial asset is impaired, a write-down is made for the estimated loss. Objective evidence means occurrences indicating that the loan is impaired. Such evidence may include information about damaged credit histories, bankruptcy or other defaults. At fair value through the income statement On implementing IFRS, and in subsequent periods for initial recognition in the accounts, all financial assets and liabilities can be measured at fair value through profit or loss if they have been purchased with the intention of being sold or: • the classification reduces a mismatch in the measurement or recognition that would have arisen otherwise as a result of different rules for the measurement of assets and liabilities • the financial assets are included in a portfolio that is managed and evaluated regularly at fair value Financial assets measured at fair value through profit or loss is measured at fair value on the balance sheet date. Changes in fair value are recognised in profit or loss. Changes in fair value are included in "Net income/(loss) on financial instruments".
Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the business transfers the financial asset in a transaction where all or practically all the risk and rewards related to ownership of the asset are transferred.
The Company has, on the balance sheet day, non financial assets or liabilities carried at fair value. The Bank will continuously assess whether new financial assets or liabilities are carried at fair value if the criteria for this are met.
Classification of financial instruments
Available-for-sale
When initially recognised, financial assets are classified in one of the following categories, depending on the purpose of the investment:
Securities available for sale are non-derivative financial assets that are designated as such or that are not classified in any other category. Securities in this category are measured at fair value, while changes in fair value are recognised through the statement of comprehensive income. Each quarter these assets are tested for impairment. If the impairment is significant the total loss measured as the difference between the cost of acquisition and fair value less any impairment of the financial asset that has previously been recognised in the income statement - is deducted from equity and recognised in the income statement. Impairments of shares and similar instruments recognised in the income statement are reversed through the statement of comprehensive income.
• Loans and receivables, carried on the balance sheet at amortised cost • Financial assets that are to be recognised at fair value with fair value changes through profit or loss (Fair value option) • Available-for-sale financial assets, measured at fair value with changes in value recognised in equity • Held-for-trading financial assets measured at fair value through profit or loss • Investments held to maturity, carried at amortised cost • Derivatives classified as hedging instruments When initially recognised, financial liabilities are classified in one of the following categories: • Financial liabilities defined as liabilities measured at fair value with fair value changes through profit or loss • Other financial liabilities carried at amortised cost
Investments held to maturity Investments held to maturity are non-derivative financial assets with fixed or determinable payments and with a fixed maturity date, and that the company has the intention and capability of holding until maturity, with the exception of: • those that the company initially designates at fair value through profit or loss • those that meet the definition of loans and receivables
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
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Held to maturity assets are measured at amortised cost using the effective interest rate method. Financial derivatives The trading of financial derivatives is subject to strict limitations. All derivatives are measured at market value on the contract date. Subsequent measurement is done at fair value with changes in value being recognised as they occur. Fair value for derivatives are measured based on listed prices whenever possible. When listed prices are not available, the company estimates fair value based on valuation models that use observable market data.
Debt securities include certificates of deposit or bonds issued by the Bank, as well as repurchased bonds issued by the Bank. Debt securities are carried at fair value upon initial recognition and amortized cost using the effective interest method in subsequent periods. When calculating the effective interest rate, cash flows are estimated and all the contractual terms of the financial instruments are taken into account.
The company does not use hedge accounting.
Interest rate costs and the amortisation of premium/discount on instruments are recognised in "Net interest rate income" using the IRR method.
Fair value
Premium/discount on issued bonds
Fair value is the amount for which an asset can be sold or a liability can be settled by a transaction at arm’s length between wellinformed and free parties. For financial assets listed on the stock exchange or on another regulated market place, fair value is set at the bid price on the last trading day up to and including the balance sheet day. For an asset that is to be acquired or for a liability that is held, fair value is set at the offer price.
When bonds issued by the Bank are repurchased, the discount or premium is recognised in profit or loss.
Where the market for a financial instrument is inactive, fair value is established through valuation methods. Valuation methods include the use of recently completed market transaction at arm's length between well informed and free parties, if these are available; references to the current fair value of another instrument that is virtually similar; discounted cash flow calculations; and option pricing models. If there is a valuation method that is widely used by market participants to price the instrument, and the technique has a track record of producing reliable estimates of prices actually achieved in real market transactions, that method is used. Amortised cost method Financial instruments that are not measured at fair value are valued at amortised cost and the income is calculated using the internal rate of return method. In the internal rate of return method the investment's internal rate of return is used. The internal rate of return is determined by discounting the contractual cash flows within the anticipated term to maturity. Cash flows include establishment fees and the costs of transaction that are not covered by the customer. Amortised cost is the current value of such cash flows discounted by the internal rate of return. Debt to credit institutions Liabilities to credit institutions are recognised and measured after initial recognition at amortized cost using the effective interest method. Interest expense on these instruments is included in "Net interest income".
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Debt securities in issue
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
Accounting provisions A provision is made when the company has a legal or implicit liability as a result of a past event, and it is probable that this will lead to a payment or transfer of other assets to cover the liability.
Taxation The tax expense comprises tax payable and deferred tax. The income tax is recognised as an expense or income and is included in the income statement as a tax expense with the exception of income tax on transactions that are recognised directly in equity. Payable tax is based on the Company's taxable income and is calculated in accordance with Norwegian tax regulations and tax rates. The deferred tax assets and liabilities are recognised using the balance method on all temporary differences that arise between taxable and accounting values of assets and liabilities. Deferred tax assets are calculated on unused loss carry-forwards and unused tax credits. The tax asset is only recognised to the extent that it is probable that future taxable profits may be used to offset temporary differences, unused tax loss carry-forwards and unused tax credits. The carrying values of deferred tax assets and deferred tax are subject to regular reviews. Deferred tax is calculated on temporary differences and untaxed provisions. Deferred tax assets and deferred tax liabilities are not discounted. Assets and liabilities are measured at the current tax rate in the period when the asset is realised or the liability is settled, based on the tax rate on the balance sheet day. Payable tax assets and tax liabilities, as well as deferred tax assets and tax liabilities, are offset if legally possible.
2. Critical accounting estimates and judgements
means evidence of occurrences indicating that the loan is impaired. This may be information about damaged credit histories, bankruptcy or defaults.
General
Intangible assets
The preparation of the financial statements under simplified IFRS and the application of the adopted accounting policies require that management make assessments, prepare estimates and apply assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and the associated assumptions are based on historic experience and other factors that are assessed as being justifiable based on the underlying conditions. The actual figures may deviate from these estimates. The estimates and the associated prerequisites are reviewed regularly. Changes in accounting estimates are recognised in the period the estimates are revised if the change only affects this period, or both in the period the estimates change and in future periods if the changes affect both the existing and future periods. The Gjensidige Bank Boligkreditt AS accounting principles in which assessments, estimates and prerequisites may significantly diverge from the actual results are discussed below.
Write-downs and losses Loans and claims are evaluated each balance day to assess whether there are objective evidence that a claim/loan or a group of claims/loans are impaired. Individual write-downs are assessed before the write-down on groups is determined.
Intangible assets, consisting primarily of software, are reviewed annually to ensure that the depreciation method and period used match economic realities. The same applies to the residual value. Assets are written down if there is evidence of impairment.
Impairment of financial assets Financial assets that are not carried at fair value are tested for impairment if there is objective evidence on the balance sheet date that a financial asset or a group of financial assets has fallen in value.
3. Segment Information Gjensidige Bank Boligkreditt AS has only one business segment and that is lending to private customers. The segment consists of loans to private customers and the entire loan portfolio is purchased from Gjensidige Bank ASA. The Company’s full accounts fall therefore entirely under the segment “Consumer”. The Company does not engage in activities outside Norway. Customers with foreign domicile are classified as part of the Norwegian operations. All revenues and the Company's profit is related to the business in Norway.
If there is objective evidence that a financial asset is impaired, a write-down is made for the estimated loss. "Objective evidence"
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
13
4. Net interest income NOK thousand
1.1.-31.12.2012 1.1.-31.12.2011
Interest income
Loans to and receivables from customers Interest-bearing securities- valued at fair value Total interest income 1)
4,838
4,454
181,451
97,594
2,850 189,139
102,048
122,614
75,643
18,969
9,858
Interest expense Interest and similar expenses on securities issued Other interest and similar expenses Total interest expenses 2)
141,583
85,501
47,556
16,547
1) Of this total interest income on financial assets that are not at fair value
186,289
102,048
2) Of this total interest expenses on financial liabilities that are not at fair value
141,583
85,501
Net interest income
The Company classifies all financial assets as loans and receivables and all financial liabilities other financial liabilities.
5. Operating expenses NOK thousand Wages, salaries, etc. Pension costs Employer’s NICs Total wages, salaries, etc. IT expenses Fees
1.1.-31.12.2012 1.1.-31.12.2011 1,146
208
66
5
116
19
1,328
232
442
542
2,393
2,337
Other operating expenses
3,175
522
Total other expenses
6,009
3,401
Ordinary depreciation
428
641
7,765
4,274
Total operating expenses Auditor’s fee Statutory auditing – KPMG 1)
94
151
Audit-related services 1)
126
125
Other services – KPMG 1)
104
19
Tax-related services Internal auditing Total payments to auditor
324
295
Average full-time equivalent employees
1
1
Full-time equivalent employees
1
1
1) Services to audit are disclosed including VAT.
14
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
5. Operating expenses (cont.) Salary and other benefits to management and governing body in 2012
NOK thousand Name and position
Number of shares Number Share assigned, of shares Fixed pay Variable Other Pension based not outstanand fees pay benefits cost payment redeemed ding
The current Interest repayment Loans rate schedule
Senior executives Jan Kåre Raae, CEO
841
67
16
66
62
786
786
Board of Directors Jørgen Ringdal, Chairman Erik Randberg Gro Tønder Solbjørg Lie Total for senior executives and Board of Directors
2,973
3,4 %
20.9.2032
45 886
67
16
66
62
786
786
2,973
Control Committee Sven Iver Steen (Chairman)
12
Hallvard Strømme
8
Liselotte Aune Lee
8
Vigdis Myhre Næsseth Total
7 34
Representatives Helge L Baastad Salary and other benefits to management and governing body in 2011
NOK thousand Name and position
Number of shares Number Share assigned, of shares Fixed pay Variable Other Pension based not outstanand fees pay benefits cost payment redeemed ding
The current Interest repayment Loans rate schedule
Senior executives Jan Kåre Raae, CEO (15.6. - 31.12.)
427
30
Tormod S Pettersen, CEO (1.1. - 14.6.) Board of Directors Jørgen Ringdal, Chairman of the board Erik Randberg Solbjørg Lie
50
Gro Tønder Total for senior executives and Board of Directors
2,288 477
30
3.8 %
23.5.2018/ 6.4.2019
2,288
Control Committee Sven Iver Steen (Chairman )
17
Oddhild Marie Løbø (1.1. - 26.4.)
3
Asle Hindenes (1.1. - 26.4.)
3
Inger Tone Ødegård (1.1. - 26.4.)
3
Hallvard Strømme (27.4. - 31.12.)
8
Liselotte Aune Lee (27.4. - 31.12.)
8
Vigdis Myhre Næsseth (27.4. - 31.12.)
7
Total
46
Representatives Helge L Baastad
All loans in the Company passed through Gjensidige Bank ASA , but can as other loan commitments be transferred to Gjensidige Bank Boligkreditt AS in connection with the establishment of collateral by issuing bonds. Interest terms of the Supervisory Board and is equal to regular customer terms. The Company has no other remuneration to the Managing Director and has not committed itself to the CEO or chairman to give special consideration upon termination of appointment. Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
15
5. Operating expenses (cont.)
Guidelines for the coming financial year
Remuneration policies
Remuneration to the CEO
The company has established a remuneration policy based on the group's principles.
CEO's salary and other benefits shall be determined by the Board of Directors based on a comprehensive assessment taking into account Gjensidige Bank's compensation scheme and the market wage for similar type of position. Salaries are reviewed annually and determined on the basis of developments in society in general and the financial sector in particular. The variable salary (bonus) is determined by the Board of Directors based on agreed objectives and deliverables, and may not exceed three months' salary including holiday pay. Variable pay is not included in pensionable salary. The assessment takes into account the company's results last two years and an assessment of the CEO's personal contribution to the company's core values, development and results. Half of the variable remuneration will be given in the form of shares in Gjensidige Forsikring ASA, where 1/3 can be disposed of the next three years. The variable remuneration can be reduced if subsequent results and developments indicate that it was based on incorrect assumptions. The CEO is not given performance-based payments other than the above bonus, but can be given fringe benefits such as company car and reimbursement of expenses for electronic communications. Assignments of such fringe benefits shall be related to the executive function of the company, and otherwise be in line with market practice. The General Manager has a retirement age of 67 years, and is a member of the Bank's defined contribution plan. There is no severance scheme for the CEO.
The remuneration shall be competitive but not leading. It is expected that the staff takes an overall view of what the group offers of compensation and benefits. The Group's remuneration arrangements should be transparent and performance-based, so that as much as possible is perceived as fair and predictable. It should be a correlation between the performance and the remuneration provided. Remuneration and career development should be linked to the achievement of the Group, its strategic and financial goals and values, where both quantitative and qualitative objectives are taken into consideration. Measurement criteria shall promote long-term value creation, and as far as possible, taking into account the actual cost of capital. The compensation scheme will help promote and provide incentives for risk management, discourage excessive risk-taking and to help avoid conflicts of interest. Fixed base salary shall be the main element of the total remuneration, which also consists of variable pay, insurance schemes and fringe benefits. Variable pay is used to reward performance beyond the expected. Both results and behavior in terms of compliance with values, brand and management principles should be considered. The variable remuneration should be performance-based, and should reflect both the company and the manager's performance and contribution. Other offered compensation items should be considered attractive by both new and existing employees.
Decision process The Board of Directors of the Bank has established a remuneration committee consisting of two members. The main responsibilities the Committee is to prepare matters for the Board and: • Prepare proposals and follow up implementation of the Bank's guidelines and limits for the remuneration • Annually review and recommend remuneration to the CEO • Annual review and propose scorecard for the CEO • Be an advisor to the CEO regarding the annual review of remuneration to the management team members • Assess the administration's proposed "Declaration of salary and other remuneration to senior executives" see Act § 6-16a. • Consider other key benefits for senior executives
Guidelines for shares, warrants, etc. for the coming financial year Of the variable salary in 2013, given to the CEO, 50 per cent of gross earned variable pay will be granted in the form of shares in Gjensidige Forsikring ASA. The shares awarded by a third each of the next three years. The CEO has, equal to all other employees in the Gjensidige, access to participate in the group's share saving plan for employees. Under the current program, the employee can save, through salary deductions, shares in Gjensidige Forsikring ASA limited to NOK 75,000 per year. The shares can be bought on a quarterly basis after the publication of the results. A contribution is granted of 20 per cent of the purchase price, limited to NOK 1,500. It is awarded one bonus share for every four shares you have owned for more than two years for those who retain the shares and still are employed by the Group. Statement for the management remuneration policy in the previous accounting year The Board confirms that the guidelines regarding executive pay for 2012 given in last year's declaration has been followed.
16
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
6. Write-downs and losses on loans NOK thousand
1.1.-31.12.2012
1.1.-31.12.2011
4,688
1,075
4,688
1,075
Write-downs and losses for the period Change for the period in individual write-downs Change for the period in group write-downs Losses on loans previously written down Losses on loans previously not written down Payments on previously written off accounts Write-downs and losses for the period
7. Tax expenses NOK thousand Tax payable
1.1.-31.12.2012 1.1.-31.12.2011 10,657
3,378
(64)
(100)
10,592
3,277
Profit/ (loss) before tax expense
37,830
11,705
Expected tax at nominal tax rate of 28%
10,592
3,277
10,592
3,277
28%
28%
Deferred tax assets arising from temporary differences
(129)
(65)
Net deferred tax assets
(129)
(65)
Assets
64
100
At the end of the year
64
100
Change in deferred tax/tax assets Tax expense Reconciliation of tax expense
Tax effect of permanent differences Tax expense The average effective tax rate Deferred tax assets Deferred tax (-) / income (+)
Net changes in deferred tax assets/ deferred tax through profit or loss are as follows:
Deferred tax assets resulting from loss carryforwards are only recognised to the extent that it is probable that they will be realised. Deferred tax assets and deferred tax are offset and the net amount is entered when this is permitted by legislation and the amounts relate to the same tax authority.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
17
8. Intangible assets Capitalised software
NOK thousand Cost or adjusted value 1.1.2011
1,924
Acquired Disposed of Cost or adjusted value 31.12.2011
1,924
Accumulated depreciation and writedowns 1.1.2011
855
Depreciation for the year
641
Writedowns for the year Accumulated depreciation and writedowns 31.12.2011
1,497
Carrying value 31.12.2011
428
Cost or adjusted value 1.1.2012
1,924
Acquired Disposed of Cost or adjusted value 31.12.2012
1,924
Accumulated depreciation and writedowns 1.1.2012
1,497
Depreciation for the year
428
Writedowns for the year Accumulated depreciation and writedowns 31.12.2012
1,924
Carrying value 31.12.2012 Useful life
3 Years
Please also refer to Note 7-Tax showing NOK 129,372 in deferred tax assets in the balance sheet under intangible assets. These are not included in this note.
9. Other Assets NOK thousand Earned income not yet received Advance payments Total
31.12.2012
31.12.2011
5,571
2,787
87 5,657
2,787
31.12.2012
31.12.2011
245,218
217,362
245,218
217,362
10. Loans to and receivables from credit institutions NOK thousand Loans and receivables without an agreed term to maturity, amortised cost 1) Loans and receivables with an agreed term to maturity, amortised cost Total loans and receivables to credit institutions, amortised cost 1) Deposits in Gjensidige Bank ASA
18
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
11. Analysis of loans NOK thousand
31.12.2012
31.12.2011
7,187,263
3,546,432
7,187,263
3,546,432
7,315
2,627
7,179,948
3,543,805
Private individuals
7,187,263
3,546,432
Total
7,187,263
3,546,432
Loans to customers, amortised cost Loans to customers, fair value Total gross loans to customers Individual write-downs Group write-downs (see note 13) Net loans to customers Loans by sector and industry
Loans by region based on customers residential address: 31.12.2012 NOK thousand
Loans
31.12.2011
Per cent
Loans
Per cent
Oslo
1,582,260
22.01%
716,509
20.20%
Akershus
1,701,647
23.68%
932,729
26.30%
Eastern Norway
1,266,948
17.63%
601,364
16.96%
Southern Norway
192,279
2.68%
107,519
3.03%
1,461,537
20.34%
708,280
19.97%
Central Norway
679,299
9.45%
295,480
8.33%
Northern Norway, Svalbard
295,963
4.12%
175,192
4.94%
Western Norway
Abroad Total gross loans by geographic area
7,329
0.10%
9,359
0.26%
7,187,263
100.00%
3,546,432
100.00%
31.12.2012
31.12.2011
Gjensidige Bank Boligkreditt AS has no guarantees to customers
12. Interest bearing securities NOK thousand
395,829 State-owned enterprises Norwegian financial institutions Covered bonds
90,227
Covered bonds used in swap scheme Exchange rate adjustment
1,911
Total
487,967
Stock exchange listed securities
487,967
Unlisted securities Total
487,967
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
19
13. Impairment of loans NOK thousand
31.12.2012
31.12.2011
Group write-downs 1.1.
2,627
1,552
Change for the period in group write-downs
4,688
1,075
Group write-downs 31.12.
7,315
2,627
Total write-downs 31.12.
7,315
2,627
31.12.2012
31.12.2011
2,070,921
222,371
2,070,921
222,371
Individual write-downs 1.1. Losses on loans previously written down Change for the period in individual write-downs Payments on previously written off accounts Individual write-downs 31.12.
The company does not have default over 90 days.
14. Debt to credit institutions NOK thousand Debt without an agreed term to maturity, amortised cost Debt with an agreed term to maturity, at amortised cost Total debt to credit institutions, amortised cost
15. Debt incurred through the issue of securities NOK thousand ISIN Number
Book value Currency
Rate
Issued
Due
Ext.Due
Face value
31.12.2012
NO0010538481
NOK
NO0010538499
NOK
Variable
16.9.2009
16.9.2014
16.9.2015
250,000
250,000
Variable
16.9.2009
15.4.2015
15.4.2016
250,000
250,000
NO0010538507
NOK
NO0010562085
NOK
Variable
16.9.2009
16.11.2015
16.11.2016
500,000
500,000
Variable
29.12.2009
19.9.2013
19.9.2014
500,000
500,000
NO0010538481 NO0010607385
NOK
Variable
17.11.2010
16.9.2014
16.9.2015
300,000
295,800
NOK
Variable
8.4.2011
15.4.2014
15.4.2015
300,000
299,910
NO0010612278
NOK
Variable
30.5.2011
3.6.2014
3.6.2015
300,000
299,820
NO0010615644
NOK
Variable
24.6.2011
30.6.2015
30.6.2016
300,000
299,721
NO0010629157
NOK
Variable
21.11.2011
21.11.2016
21.11.2017
300,000
299,580
NO0010538481
NOK
Variable
22.11.2011
16.9.2014
16.9.2015
200,000
197,214
NO0010538481
NOK
Variable
24.11.2011
16.9.2014
16.9.2015
100,000
98,610
NO0010641897
NOK
Variable
11.4.2012
11.4.2017
11.4.2018
500,000
499,500
NO0010641897
NOK
Variable
27.4.2012
11.4.2017
11.4.2018
400,000
399,920
NO0010641897
NOK
Variable
6.6.2012
11.4.2017
11.4.2018
100,000
99,942
NO0010660327
NOK
Variable
21.9.2012
21.9.2018
23.9.2019
500,000
499,400
NO0010662737
NOK
Variable
6.11.2012
6.5.2019
6.5.2020
700,000
699,146
Amortisation Total debt incurred through the issue of securities Own bonds
4,310 5,500,000
5,492,873
10,000
10,010
5,490,000
5,482,866
Amortisation own bonds Total debt incurred through the issue of securities excluding own securities
20
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
3
15. Debt incurred through the issue of securities (cont.) NOK thousand ISIN Number
Book value Currency
Rate
Issued
Due
Ext.Due
Face value
31.12.2011
NO0010538481
NOK
Variable
16.9.2009
16.9.2014
16.9.2015
250,000
250,000
NO0010538499 NO0010538507
NOK
Variable
16.9.2009
15.4.2015
15.4.2016
250,000
250,000
NOK
Variable
16.9.2009
16.11.2015
16.11.2016
500,000
500,000
NO0010562085
NOK
Variable
29.12.2009
19.9.2013
19.9.2014
500,000
500,000
NO0010538481
NOK
Variable
17.11.2010
16.9.2014
16.9.2015
300,000
295,800
NO0010607385
NOK
Variable
8.4.2011
15.4.2014
15.4.2015
300,000
299,910
NO0010612278
NOK
Variable
30.5.2011
3.6.2014
3.6.2015
300,000
299,820
NO0010615644
NOK
Variable
24.6.2011
30.6.2015
30.6.2016
300,000
299,721
NO0010629157
NOK
Variable
21.11.2011
21.11.2016
21.11.2017
300,000
299,580
NO0010538481
NOK
Variable
22.11.2011
16.9.2014
16.9.2015
200,000
197,214
NO0010538481
NOK
Variable
24.11.2011
16.9.2014
16.9.2015
100,000
98,610
Amortisation Total debt incurred through the issue of securities
1,114 3,300,000
3,291,769
3,300,000
3,291,769
Own bonds Amortisation own bonds Total debt incurred through the issue of securities excluding own securities
Standard contract terms (loan terms) apply to the signed loan agreements. In accordance with the lending program, the company's requirements for pledging of 110 per cent is fulfilled. Gjensidige Bank Boligkreditt AS met all terms and conditions under existing conditions in 2012.
16. Other liabilities NOK thousand
31.12.2012
31.12.2011
15,578
4,178
Accrued interest expenses
15,924
9,736
Total other liabilities
31,502
13,913
31.12.2012
31.12.2011
Unused credit facilities
1,488,311
802,570
Total contingent liabilities
1,488,311
802,570
17. Off-balance sheet commitments and contingent liabilities NOK thousand
Unused credit facilities includes approved and unused credit limits on home equity lines of credit. The Company has not received or issued any provisions of security by surety.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
21
18. Classification of financial instruments 31.12.2012 NOK thousand
Book value
31.12.2011
Fair value
Book value
Fair value
Classification of financial instruments Net loans to and receivables from credit institutions Loans to and receivables from credit institutions, amortised cost
245,218
245,218
217,362
217,362
Loans to and receivables from credit institutions
245,218
245,218
217,362
217,362
Bonds and other fixed-income securities Certificates and bonds, fair value
487,967
487,967
Total bonds and other fixed-income securities
487,967
487,967
Loans to and receivables from customers, amortised cost
7,187,263
7,187,263
3,546,432
3,546,432
Total loans before individual and group write-downs
7,187,263
7,187,263
3,546,432
3,546,432
7,315
7,315
2,627
2,627
7,179,948
7,179,948
3,543,805
3,543,805
Other financial assets, amortised cost
5,657
5,657
2,787
2,787
Total other financial assets
5,657
5,657
2,787
2,787
7,918,791
7,918,791
3,763,954
3,763,954
Financial assets at amortised cost, loans and receivables
7,918,791
7,918,791
3,763,954
3,763,954
Total financial assets
7,918,791
7,918,791
3,763,954
3,763,954
Loans and deposits from credit institutions, amortised cost
2,070,921
2,070,921
222,371
222,371
Total liabilities to credit institutions
2,070,921
2,070,921
222,371
222,371
Commercial paper and bonds, amortised cost
5,482,866
5,508,548
3,291,769
3,262,103
Total debt securities
5,482,866
5,508,548
3,291,769
3,262,103
Other financial liabilities, amortised cost
20,795
20,795
10,501
10,501
Total other financial liabilities
20,795
20,795
10,501
10,501
7,574,581
7,600,264
3,524,641
3,494,975
Net loans to customers Loans to and receivables from customers, fair value
- Write-downs of individual loans - Group write-downs Total net loans to customers Other assets
Total financial assets Financial assets summarised by classification
Classification of financial liabilities Liabilities to credit institutions
Debt Securities
Other financial liabilities
Total financial liabilities Financial obligations summarised by classification Financial liabilities, fair value Financial liabilities, amortised cost
7,574,581
7,600,264
3,524,641
3,494,975
Total financial liabilities
7,574,581
7,600,264
3,524,641
3,494,975
Assets and liabilities that are measured at fair value, whether this is because they are part of the trading portfolio, were designated at fair value on initial recognition or are held as available for sale, shall be classified according to how reliable the fair value estimate is. There are three classification levels, with level 1 assets having prices quoted in active markets. Level 2 valuations are directly or indirectly based on observable prices for similar assets. Level 3 valuations are not based on observable prices, and instead rely on e.g. our own valuation models. 22
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
18. Classification of financial instruments (cont.) 31.12.2012 NOK thousand
Level 1
Level 2
Level 3
Total
Loans to and receivables from customers, designated at fair value Interest-bearing securities, designated at fair value
397,153
90,814
487,967
397,153
90,814
487,967
Shares, designated at fair value Shares, available for sale Derivatives, trading portfolio Total assets measured at fair value Deposits and liabilities to customers, measured at fair value Liabilities opened for the issue of securities, measured at fair value Derivatives, trading portfolio Total liabilities measured at fair value There are no financial instruments at fair value in 2011.
19. Maturity analysis of assets and liabilities 31.12.2012 NOK thousand
1 month
1-3 months
3-12 months
1-5 years
More than 5 years
Perpetual loans
Total
Assets Loans to and receivables from credit institutions Loans to and receivables from customers
245,218
245,218
27
30
859
784,087
6,402,260
245,245
30
859
784,087
6,402,260
99,680
297,473
90,814
Group write-downs on loans to and receivables from customers Net loans to customers and credit institusions Certificates, bonds and other interest-bearing securities
Advance payments and earned income 245,245
99,710
298,332
874,901
(7,315)
(7,315)
(7,315)
7,425,166 487,967
Intangible assets
Total assets
7,187,263
6,402,260
129
129
5,657
5,657
(1,528)
7,918,920
Liabilities Liabilities to credit institutions
2,070,921
2,070,921
Liabilities opened for the issue of securities
5,482,866
5,482,866
10,657
10,657
Tax payable Other liabilities
20,845
Total liabilities
20,845
20,845 7,564,443
7,585,288
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
23
19. Maturity analysis of assets and liabilities (cont.) 31.12.2011 NOK thousand
1 month
1-3 months
3-12 months
1-5 years
More than 5 years
Perpetual loans
Total
Assets Loans to and receivables from credit institutions Loans to and receivables from customers
217,362 2,554
217,362 1,869
27,664
1,736,585
Group write-downs on loans to and receivables from customers Net loans to customers and credit institusions
219,915
1,869
27,664
1,736,585
1,777,761
3,546,432
(2,627)
(2,627)
1,775,134
3,761,167
Certificates, bonds and other interest-bearing securities Intangible assets Advance payments and earned income Total assets
219,915
1,869
27,664
1,736,585
493
493
2,787
2,787
1,778,414
3,764,447
Liabilities Liabilities to credit institutions Liabilities opened for the issue of securities Tax payable
222,371
222,371
3,291,769
3,291,769
3,378
Other liabilities
10,535
Total liabilities
10,535
3,378 10,535
3,378
3,514,140
3,528,053
20. Loan to value ratio and security mass NOK thousand Gross loans to customers Number of loans Total values for loans Weighted average remaining life (months) Weighted indexed average loan-to-value ratio
31.12.2012
31.12.2011
7,187,263
3,546,432
5,630
3,071
21,232,040
11,990,013
173
160
52%
46%
7,175,301
3,545,040
Composition of security mass: Mortgage 1) substitute collateral 2) Total
733,185
217,362
7,908,485
3,762,402
1) According to the regulations, covered bonds can not exceed more than 75% of property value. As of 311 December 2012 the company has NOK 8.7 million which exceeds the limit and are therefore not included in the calculation of the security portfolio. The Company has per 31. December 2012 no loans in default. Tree customers is in default on their comitment in Gjensidige Bank ASA and are not included in the safety population. 2) Filling security consists of loans and receivables to credit institutions, treasury bills and bonds.
24
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
21. Transactions with related parties Overview related parties Gjensidige Bank ASA is the parent company (100%), while Gjensidige Forsikring ASA is the Group's parent company. All companies in the group are to be regarded as related parties and will be specified to the extent that the Company has transactions or balances with them.
Transactions with related parties The list below shows the transactions with related parties that are recognised in the income statement. 1.1.-31.12.2012 NOK thousand
1.1.-31.12.2011
Income
Expense
Income
Expense
4,514
43,998
3,787
35,677
Net interest income Gjensidige Bank ASA Gjensidige Forsikring ASA
57
Glitne Invest AS
2,839
2,212
Other income Gjensidige Bank ASA
516
43
Other expenses Gjensidige Bank ASA Total
1,974 5,030
1,036
48,868
3,830
Liabilities
Assets
38,925
Balance with related parties The list below shows assets / liabilities on / to related parties 31.12.2012 NOK thousand Gjensidige Bank ASA
Assets 245,218
- of which covered bonds
31.12.2011
3,273,690
192,558
1,193,642
Gjensidige Forsikring ASA - covered bonds
1,176,028 948,865
74,954
Glitne Invest AS - covered bonds Total
Liabilities
74,126 245,218
3,348,644
192,558
1,250,154
Transactions with the Board and the Supervisory Board are not include, see note 5.
When Gjensidige Bank Boligkreditt AS was established an agreement was signed with Gjensidige Bank ASA for the delivery of services related to loan administration and operations of the CompanyIn addition Gjensidige Bank Boligkreditt AS is granted a long-term credit facility of up to NOK 1,000 million, as well as short-term vendor financing of up to NOK 1,500 million.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
25
22. Capital adequacy NOK thousand
31.12.2012
31.12.2011
290,020
220,020
Subordinated loan capital
Other equity Equity
43,612
16,374
333,632
236,394
Deductions Goodwill and other intangible assets Deferred tax assets
(428) (129)
(65)
Core capital
333,503
235,901
Net equity and sub-ordinated loan capital
333,503
235,901
Institutions
3,923
3,478
Enterprises
50
Minimum requirement for equity and subordinated debt Credit risk Of which:
Mass market positions Positions secured by mortgage
7,662
772
218,645
110,252
Covered bonds
722
Other positions
109
Total minimum requirement credit risk Operational risk
231,111
114,502
4,092
1,387
Deductions: Group write-downs Minimum requirement equity and subordinated loan capital Surplus subordinated capital Basis of calculation balance sheet items not included in trading portfolio Basis of calculation off balance sheet items not included in trading portfolio
(585)
(210)
234,618
115,679
98,885
120,222
2,625,868
1,290,793
263,041
140,482
2,933,184
1,431,275
Capital adequacy
11.4%
16.5%
Core capital adequacy
11.4%
16.5%
Risk-weighted assets (calculation basis for capital adequacy ratio) Capital adequacy
26
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
23. Risk Gjensidige Bank Boligkreditt AS is exposed to credit risk, market risk, liquidity risk and operational risk, where credit risk is the biggest risk. Capital adequacy is measured by using standard method for credit risk and basis method for operational risk. The Board emphasizes that the Company should have a low risk, and there is established a framework for risk exposure associated with the various types of risks.
Credit risk Gjensidige Bank Boligkreditt AS is exposed to credit risk in relation to lending and counterparty risks associated with placement of liquidity reserves. All loans to private customers are purchased from Gjensidige Bank ASA and are well collateralized. At the time of purchase the loans should be within 75 per cent of the approved value of the collateral. The value of the homes used as collateral for mortgages in the Company is updated every three months. The value is set using estimates from Eiendomsverdi AS. Gjensidige Bank ASA provides loans to customers based on credit scoring, combined with an individual assessment of repayment ability. The first group of loan from Gjensidige Bank ASA was transferred in September 2009. Since that time, the market price of housing has increased. Gjensidige Bank ASA manages the company's loan and can show to a good delinquency development and follow-up of the portfolio. Approximately 65 per cent of the loan portfolio is within 60 per cent of collateral value. There is an only marginal exposure that is secured with over 75 per cent of the collateral value. Portfolio risk is considered to be low. As of 31. December 2012 the Company had a gross loan at NOK 7,187.3 million and no loans were in delinquency over 90 days. Development of the loan portfolio is monitored through monthly credit risk reports with focus on LTV, development of property prices, geographic distribution, credit scores and delinquency. The Company's counterparty risk is associated placement of the Company liquidity reserves. In order to limit risk and potential losses, the Company exposes placements towards solid counterparties and limits its exposure to each. The liquidity reserves are placed in financial institutions, covered bonds and short-term government securities. As of 31. December 2012 the need of capital related to credit risk was NOK 231.1 million. The Company's maximum credit risk is NOK 9,414.4 million.
Market risk Market risk is the risk of loss from adverse changes in market prices, in this context related to positions in activities in interest rate, currency and equity markets. The Company has approved limits on its interest rate risk, and which is monitored and reported monthly. Interest rate risk shall be divided into four intervals, 0-3 months, 3-12 months, 1-2 years, over 2 years. Exposure shall be measured for all positions with fixed interest, on or off the balance sheet. We assume that normal hedging has 3 months as the minimum interest period. There are set limits for exposure in the range of 0-3 months, but the risk of this interval are excluded from the limits of the total exposure. Net accrued interest risk exposure than three months shall not exceed plus / minus 400 milli years for any year range. Net interest rate risk exposure within each
time interval shall be within plus / minus 400 milli years. As of 31. December 2012 the exposure in the 0-3 month`s interval was within a positive exposure of 110 milli years and positive exposure of 163 milli years in the interval over 3 months. (For example, an exposure of 1000 milli years means that the maximum loss to the Bank is 10 million by one parallel shift in the yield curve). Currency risk is the risk of loss resulting from currency exchange rates evolve differently than he has assumed in its reviews. Gjensidige Bank Boligkreditt AS is not exposed to currency risk. Equity risk is the risk that the company undertakes investments in current or long-term shares. Gjensidige Bank Boligkreditt AS has no such investments. The company has no derivative agreements at 31. December 2012.
Liquidity risk Liquidity risk is the risk that the bank will be unable to meet all of its financial obligations when they are due, or be unable to finance the assets, including the desired growth without significant additional costs. The Company manages liquidity reserve including on the basis of Board approved requirements for minimum liquidity reserves to ensure that obligations are met when due. The company shall keep a low liquidity risk. The board has set contingency plans for managing liquidity- and capital crisis.
Operational risk Operational risk refers to the risk loss resulting from human errors, external events or deficiencies or inadequacies in the company's internal systems, routines or processes. Act and the regulations set specific requirements for the Company to have various registers to be in place. This is partly done in order to verify that the loans being transferred to the mortgage company really satisfies all the requirements that must be met. Among other things, the regulations § 11 requires that each security should have a register of loans, interest rate and currency contracts, collateral and covered bonds. Through the creation of these registers, the Company will easier detect errors or defects that arise in the borrowing base, which is also reviewed/audited by an external party. Services such as contact management, management of loans, banking and administrative services are purchased from Gjensidige Bank ASA and Gjensidige Forsikring ASA. Conditions are regulated by agreements that set standards for quality and timely deliveries. Operational risks are identified and communicated via the Bank's internal procedures that are tested regularly. Follow-up of the internal control lies with the Internal Control Responsible and Risk Manager. The Bank’s management has regular review of its internal controls. The Bank has a complex IT infrastructure that must function at all times. It is therefore particularly focus on risks related to ICT. The capital needed to cover the operational risk is per 31. December 2012 NOK 4.1 million.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
27
24. Credit risk Credit exposure for loans Mortgage customers is assessed in relation to their willingness and ability to repay the loan. Operating capacity is calculated and the customers risk is assessed at the time of application. Borrowing rate for customers in Gjensidige Bank Boligkreditt AS is less than 75% at the time of transfer from Gjensidige Bank ASA.
The collateral in Gjensidige Bank Boligkreditt AS is secured on residential property. The collateral is considered to be very good for the portfolio. There are no loans that are 90 days overdue. The collateral is considered to be good also for the overdue loans. The portfolio has a low credit risk.
The credit risk for loans that are not overdue is good.
Commitments on customer groups 31.12.2012 NOK thousand
Loans and receivables on customers
Guarantees
Unused Total credit commitments facilities
Average size of loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
Average size of loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
Average size of loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
Private individuals
7,187,263
1,488,311
8,675,574
1,277
Total
7,187,263
1,488,311
8,675,574
1,277
- Group write-downs
7,315
7,315
+ other changes in value Total loans and receivables to customers
7,179,948
1,488,311
8,668,259
1,277
Loans by geographical area based on the collateral address
31.12.2012 NOK thousand
Loans and receivables on customers
Guarantees
Unused Total credit commitments facilities
Eastern Norway
4,443,357
840,953
5,284,310
Western Norway
1,466,555
343,787
1,810,342
Southern Norway
289,434
85,026
374,460
Central Norway
685,863
176,315
862,178
Northern Norway
302,054
42,230
344,284
7,187,263
1,488,311
8,675,574
Abroad Total
Total commitments by remaining maturity 31.12.2012 NOK thousand
Loans and receivables on customers
Unused Total credit commitments facilities
1 month
27
27
1-3 months
30
30
3-12 months 1-5 years
28
Guarantees
859
859
784,087
784,087
More than 5 years
6,402,260
1,488,311
7,890,571
Total
7,187,263
1,488,311
8,675,574
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
24. Credit risk (cont.) Aged Analysis of Loans that are due Loans and receivables on customers
31.12.2012 NOK thousand
Guarantees
Unused credit facilities
Total commitments
Default 1 - 30 days
51,331
51,331
Default 31 - 60 days
2,623
2,623
53,955
53,955
Default 61 -90 days Default over 90 days Total Overdue loans over 90 days by geographical area Eastern Norway Western Norway Central Norway Northern Norway Total Only non-performing loans are classified by geographical area in this overview. Commitments are considered in default when a credit is overdrawn for more than 90 days and the amount is at least NOK 1.000
Credit risk by customer groups 31.12.2012 NOK thousand
Total loans with impairment
Total commitments
Private individuals
8,675,574
Total
8,675,574
Total value changes
Total impairment
Total value changes over income statement
Commitments on customer groups 31.12.2011 NOK thousand
Loans and receivables on customers
Guarantees
Unused Total credit commitments facilities
Average size of loans
Private individuals
3,546,432
802,570
4,349,002
1,154
Total
3,546,432
802,570
4,349,002
1,154
- Group write-downs
2,627
Gross nonperforming loans
Individual impairment
Net nonperforming loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
2,627
+ other changes in value Total loans and receivables to customers
3,543,805
802,570
4,346,375
1,154
Loans by geographical area based on the collateral address
31.12.2011 NOK thousand
Eastern Norway
Loans and receivables on customers
Guarantees
Unused Total credit commitments facilities
2,207,398
471,587
2,678,985
Western Norway
716,251
173,039
889,290
Southern Norway
148,317
46,389
194,706
Central Norway
299,702
87,964
387,666
Northern Norway
174,764
23,591
198,355
3,546,432
802,570
4,349,002
Average size of loans
Abroad Total
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
29
24. Credit risk (cont.) Total commitments by remaining maturity 31.12.2011 NOK thousand
Loans and receivables on customers
1 month
Guarantees
Unused Total credit commitments facilities
2,554
2,554
1,869
1,869
27,664
27,664
Average size of loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
Average size of loans
Gross nonperforming loans
Individual impairment
Net nonperforming loans
1-3 months 3-12 months 1-5 years More than 5 years
3,514,345
802,570
4,316,915
Total
3,546,432
802,570
4,349,002
Aged Analysis of Loans that are due 31.12.2011 NOK thousand
Loans and receivables on customers
Default 1 - 30 days
Guarantees
Unused Total credit commitments facilities
20,205
20,205
20,205
20,205
Default 31 - 60 days Default 61 -90 days Default over 90 days Total
Overdue loans over 90 days by geographical area Eastern Norway Western Norway Central Norway Northern Norway Total Only non-performing loans are classified by geographical area in this overview. Commitments are considered in default when a credit is overdrawn for more than 90 days and the amount is at least NOK 1.000
Credit risk by customer groups 31.12.2011 NOK thousand
30
Total loans with impairment
Total commitments
Private individuals
4,349,002
Total
4,349,002
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
Total value changes
Total impairment
Total value changes over income statement
25. Liquidity risk As of 31. December 2012 the Company has bank deposits of NOK 245.2 million and the Company also has an opportunity to issue new covered bonds based on the existing security compound. 31.12.2012 NOK thousand Liabilities to credit institutions Liabilities opened for the issue of securities
4,419
1,076,842
22,678
1,060,200
10,653
22,525
584,473
4,096,487
1,235,054
5,949,192
1,099,367
607,151
5,156,687
1,235,054
9,601,642
1,488,311 1,503,383
Liabilities opened for the issue of securities
1 month
1-5 years
No fixed maturity
1-3 months
Total financial liabilities
3-12 months
More than 5 years
1 month
Unused credit facilities
31.12.2011 NOK thousand
If the Company's customers make use of the unused credit facilities of NOK 1,488.0 million as of 31. December 2012, the security mass will increase.
Total 2,164,139
1,488,311
1-3 months
3-12 months
1-5 years
More than 5 years
No fixed maturity
Total
653
1,306
5,987
238,262
246,208
4,702
23,670
82,656
3,610,331
3,721,359
24,976
88,643
3,848,594
4,770,137
Unused credit facilities
802,570
Total financial liabilities
807,925
802,570
The figure includes interest. Current interest rate at the end of the year is used to calculate the the interest costs.
26. Sensitivity analysis A change in the market risk that occurs within 1 year will affect the result and equity as shown below based on the balance sheet. 31. December 2012. Effect on income statement / equity 2012
Interest
NOK thousand
-1.5%
1.5%
(2,648)
2,648
(68,666)
68,666
(748)
748
Liabilities to credit institutions
22,366
(22,366)
Liabilities opened for the issue of securities
51,813
(51,813)
2,117
(2,117)
Loans to and receivables from credit institutions Loans to and receivables from customers Interest-bearing secursities
Total 2011
Interest
NOK thousand Loans to and receivables from credit institutions Loans to customers
-1.5%
1.5%
(2,348)
2,348
(33,882)
33,882
Interest-bearing securities Debt credit institutions Debt incurred through the issue of securities Total
2,402
(2,402)
31,107
(31,107)
(2,721)
2,721
This note shows the effect of a 12 month period of an immediate parallel change in interest rates of + 1.5%-points and - 1.5% points.
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
31
Auditor’s declaration
34
Gjensidige Bank Forsikring Boligkreditt – hittil i år – Annual og fjerde Report kvartal 2012 2012
Statement by the control committee
To the General Assembly and the Supervisory Board of Gjensidige Bank Boligkreditt AS The committee has, with instructions of the audit committee, reviewed the protocols from the boards meetings in 2012 including relevant documents. The committee has regularly reviewed the company’s interim reports and key indicators. Quarterly meetings have been held with corporate controller, chief risk officer, director of corporate compliance and director of group audit. The control Committee has conducted seven meetings during 2012. The meetings have been held on the company office in Oslo. The management has provided additionall information about the financial position and other factors in the meetings. The committee has received satisfactory answers to their questions. The company's external auditor has participated in two of the control committee meeting and informed on their work. The external auditors has not made any written inquiries to the company. The committee has reviewed the boards report and the 2012 financial statement. The committee considers the boards assessment of the financial position as adequate and recommends the adoption of the accounts presented as the company’s financial statements for 2012.
Oslo, 8. March 2013
Sven Iver Steen Chairman
Liselotte Aune Lee
Hallvard Strømme
Vigdis Myhre Næsseth (Deputy member)
[Translation has been made for information purposes only]
Gjensidige Gjensidige Forsikring Bank Boligkreditt – hittil i år og – Annual fjerde kvartal Report 2012
35
Gjensidige is a leading Nordic insurance group built by customers, for customers. The Group has been listed on the Oslo Stock Exchange since 2010. For nearly 200 years, we have worked passionately to secure the lives, health and assets of our customers. We have about 3,100 employees and offer insurance products in Norway, Denmark, Sweden and the Baltic states.In Norway, we also offer banking, pension and savings. Gjensidige Bank, which is a wholly-owned subsidiary of Gjensidige Forsikring ASA, offers electronic distribution of day-to-day banking services and consumer financing. The Group’s operating income was NOK 19.5 billion in 2012, while total assets was NOK 94.2 billion.
Gjensidige Bank Boligkreditt AS Drammensveien 288 NO-0282 OSLO, Norway