interim report - ssf · bustadkreditt sogn og fjordane as interim report • q1 2015 5 collectively...

INTERIM REPORTQ1 2015 (unaudited)

Bustadkreditt Sogn og Fjordane AS INTERIM REPORT • Q1 2015 3

Key figures

FIGURES IN NOK ‘000s 31.03.15 31.03.14 31.12.14

INCOME STATEMENTProfit/loss after taxation 29 446 32 079 112 243

Net interest margin 1,53 % 1,81 % 1,64 %

Profit/loss after tax as a % of average total assets 1,12 % 1,41 % 1,19 %

KEY BALANCE SHEET FIGURESGross loans to customers 9 899 200 8 523 805 9 661 293

Loan impairment 7 025 9 098 9 887

Equity 705 644 707 934 788 098

Total assets 10 759 079 9 003 368 10 416 896

Average total assets 10 524 129 9 074 715 9 457 067

OTHER KEY FIGURESCost-to-income ratio 5,47 % 4,66 % 4,59 %

Impairment charge as a % of gross loans – 0,03 % – 0,07 % – 0,05 %

Impairment provisions as a % of gross loans 0,07 % 0,11 % 0,10 %

Return on equity after tax*) 14,95 % 19,16 % 15,07 %

Capital adequacy ratio 16,31 % 19,67 % 16,75 %

YEAR-ON-YEAR BALANCE SHEET GROWTHGrowth in total assets 19,50 % 4,91 % 13,20 %

Growth in customer lending 16,14 % 6,16 % 11,33 %

Information about the loan portfolioSurplus value of cover pool (NOK millions) 2 408 2 172 2 068

Surplus value of cover pool (%) 29,0 % 32,0 % 24,9 %Committed surplus (%) 11,0 % 11,0 % 11,0 %

Loan-to-value ratio, indexed 50,6 % 56,0 % 55,7 %

Loan-to-value ratio, not indexed 57,2 % 57,9 % 58,0 %

Face value of covered bonds issued (NOK millions) 8 302 6 785 8 302

Substitute assets other than loans (NOK millions) 858,0 479,0 755,3

Weighted average time since issue of loans (years) 3,1 3,0 3,1

Weighted average remaining term of loans (years) 16,0 15,8 16,3

Proportion of variable-rate loans 100 % 100 % 100 %

Proportion of flexible mortgages 27,0 % 29,7 % 27,3 %

Average loan value (NOK millions) 1 , 12 1 , 1 1 1 , 17

Number of loans 8 826 7 687 8 273

Proportion of loans secured by an overseas property 0 % 0 % 0 %

*) Calculated using the opening equity balance adjusted for capital increases.

4 Bustadkreditt Sogn og Fjordane AS INTERIM REPORT • Q1 2015

HIGHLIGHTSBustadkreditt Sogn og Fjordane AS is a wholly-owned subsidiary of Sparebanken Sogn og Fjordane, with its head o¤ce in Førde.

Bustadkreditt Sogn og Fjordane AS has given the Sparebanken Sogn og Fjordane group access to long-term funding on competitive terms. It finances itself by issuing covered bonds.

Services such as customer care, loan servicing, management and administrative services are supplied by Sparebanken Sogn og Fjordane.

At the end of March 2015, the Company had 8,826 mortgages with a total face value of NOK 9,899 million. The loans in the cover pool were issued by Sparebanken Sogn og Fjordane, and subsequently bought by Bustadkreditt Sogn og Fjordane. All of the Company’s loans were subject to a variable interest rate. 27.0% of the loan book was made up of flexible mortgages.

The weighted average loan-to-value ratio was 50.6 percent, the weighted average loan term was 16.0 years and the weighted average time since the loans were granted was 3.1 years. The average loan per customer was NOK 1.12 million. The Company’s total loan portfolio grew by NOK 1,375 million over the past year.

The volume of covered bonds issued by the Company was NOK 8.3 billion.

RATING OF COVERED BONDSIn the third quarter of 2011, Bustadkreditt Sogn og Fjordane AS’s covered bond programme was given a “long term rating” of Aaa by the ratings agency Moody’s. That rating remains unchanged.

CHANGE IN CALCULATION OF LOAN-TO-VALUE RATIOS All Norwegian credit institutions use Eiendomsverdi to provide valuations of the collateral in their cover pools. Eiendomsverdi provides two estimates: one unbiased estimate, and one adjusted estimate that downwardly adjusts the unbiased estimate for the riskiest assets.

Some Norwegian covered bond companies have used the unbiased estimate and others the adjusted estimate to calculate loan-to-value ratios. Bustadkreditt Sogn og Fjordane has in the past used the adjusted estimate. As of first quarter 2015, the company will follow the advice from the Norwegian committee on covered bonds, which recommends that Norwegian covered bond companies use the unbiased estimate to calculate loan-to-value ratios.

The reported loan-to-value ratio in Bustadkreditt Sogn og Fjordane falls from 55.7 % at the end of 2014 to 50.6 % at 31 March 2015. Change of methodology for

loan-to-value ratios combined with use of a new and improved estimation model from Eiendomsverdi are the most important factors explaining this reduction. But also rising house prices and repayments on loans in the cover pool contribute to the reduction.

KEY FIGURES(Figures in brackets are for the year-earlier period.)• Profit after taxation of NOK 29.4 million

(32.1 million)• Net interest income of NOK 39.6 million

(40.6 million)• Operating expenses of NOK 2.2 million (1.9 million)• Net change in the value of financial instruments of

NOK -0.4 million (– 0.7 million)• Impairment charge of NOK -2.9 million

(– 5.6 million)• Annualised return on equity of 14.9%

(19.2%) after tax• Core capital adequacy ratio of 16.31% (19.67%)

FINANCIAL RESULTS In the first quarter of 2015, the Company made a pre-tax profit of NOK 40.3 million. Profit after tax was NOK 29.4 million, giving an annualised return on equity of 14.9%. The equivalent figures for the previous year were NOK 43.9 million in pre-tax profit, NOK 32.1 million in profit after tax and return on equity of 19.2%. Profit after tax was equivalent to 1.12% of average total assets, compared with 1.41% the previous year.

NET INTEREST INCOME Net interest income totalled NOK 39.6 million. The net interest margin for the first quarter of 2015 was 1.53%. The equivalent figures for the year-earlier period were NOK 40.6 million and 1.81%. The reduction was due to margins on loans to customers falling as a result of fierce competition in the banking market.

OPERATING EXPENSESOperating expenses were NOK 2.2 million, compared with NOK 1.9 million last year. The chief items were the purchase of services from Sparebanken Sogn og Fjordane, costs associated with issuing bonds and credit rating costs.

The cost/income ratio rose to 5.5% in the first quarter of 2015, from 4.7% in the year-earlier period. This was related to a slight increase in the cost of services bought from the parent company, combined with somewhat lower interest income than last year.

LOAN IMPAIRMENT CHARGEThe Company follows Sparebanken Sogn og Fjordane’s guidelines for assessing loan impairment. At 31 March 2015, one loan was more than 90 days in arrears, but no losses had been realised. Credit risk is low, and no individually assessed impairment provisions have been made.

Interim report 31.03.2015


Collectively assessed provisions are estimated using a model that takes into the quality, size and composition of the loan portfolio. The model used is the same one as is used by Sparebanken Sogn og Fjordane. In the first quarter of 2015, the Company recognised a NOK 2.9 million gain in relation to collectively assessed impairment provisions. This gain was the result of adjustments to the scoring model used after the most recent validation. This adjustment pushed customers into lower risk classes, which in turn led to a reduction in collectively assessed impairment provisions.

BALANCE SHEETThe Company had total assets of NOK 10,759 million at 31 March 2015. This represented an increase of NOK 1,756 million over the past 12 months (+ 19.5%). The increase in total assets was primarily due to growth in loans to customers.

CUSTOMER LOANS AND OTHER SUBSTITUTE ASSETSIn addition to the NOK 9,899 million of mortgage loans, NOK 858 million of other substitute assets have been established. The total value of the (adjusted) cover pool is NOK 10,721 million, which is 29.0% higher than the volume of covered bonds issued.

Around 63% of Bustadkreditt Sogn og Fjordane’s loan portfolio has a loan-to-value ratio of less than 60%. The Company considers its loan portfolio to be low-risk. The figure below shows the weighted loan-to-value ratio for the loans held by the Company.

The geographic distribution of our mortgage portfolio, based on where the main borrower lives, was as follows:

Region ShareWestern Norway 80,4 %Eastern Norway 17,8 %Central Norway 0,9 %Southern Norway 0,5 %Northern Norway 0,4 %Overseas 0,0 %Total 100,0 %

5 biggest counties measured by loan volumeCounty ShareSogn og Fjordane 51,4 %Hordaland 25,0 %Oslo 8,8 %Akershus 5,8 %Rogaland 2,6 %Rest of Norway 6,4 %Total 100,0 %

5 biggest municipalities measured by loan volumeMunicipality ShareBergen 21,5 %Førde 14,0 %Flora 11,8 %Oslo 8,8 %Sogndal 3,6 %Rest of Norway 40,4 %Total 100,0 %

Other information about the loan portfolio

Distribution by loan valueLoan value Volume (NOK millions)0 – 1 million 2 2271 – 2 million 3 9572 – 3 million 2 375over 3 million 1 340Total 9 899

The combined volume of the five biggest loans was NOK 55.8 million.

SHAREHOLDERS’ EQUITY AND CORE TIER 1 CAPITAL RATIOAt 31 March 2015, Bustadkreditt Sogn og Fjordane AS had NOK 706 million of equity. The Core Tier 1 capital ratio was 16.31%. The equivalent figures for the previous year were NOK 708 million of equity and a capital adequacy ratio of 19.67%.A dividend of NOK 111.9 million was paid to the parent company during the reporting period.

Core Tier 1 capital ratio has been calculated by measuring credit risk using the standardised approach and operational risk using the basic indicator approach.

LIQUIDITYAt the close of the first quarter, Bustadkreditt Sogn og Fjordane AS had NOK 505.9 million of deposits held at Sparebanken Sogn og Fjordane, as well as a total of NOK 351.8 million of substitute assets made up of short-term government bonds and covered bonds issued by other banks. In addition, the Company has good credit facilities with Sparebanken Sogn og Fjordane. These will allow the Company to make interest and principal payments to the owners of covered bonds, enable it to make advances to customers with flexible mortgages, provide bridge financing when loans are being transferred from the parent bank to it, and fund the necessary surplus in the cover pool.

Weighted loan-to-value ratio

0%

5%

10%

15%

20%

25%

30%

35%

40%

Over 75%60-75%50-60%40-50%Under 40%

28%

15%

20%

34%

3%


Førde, 22 April 2015The Board of Directors of Bustadkreditt Sogn og Fjordane AS

Frode VassethChair

Hallvard Klakegg Peter Midthun Ingeborg Aase Fransson

Harald SlettvollCEO

RISKUnder its licence as a credit institution, Bustadkreditt Sogn og Fjordane is subject to laws, regulations and rules that limit the level of risk to which it can be exposed. The Board of Directors and CEO are responsible for establishing risk management procedures, and for ensuring that they are adequate and in compliance with laws and regulations.

Bustadkreditt Sogn og Fjordane is exposed to credit risk, operational risk, liquidity risk and interest rate risk. The Board considers it a priority for the Company to maintain a low risk exposure. Limits have been set on exposure to the various classes of risk, and a system has been established for measuring, managing and monitoring each of them.

Credit riskCredit risk is the risk of losing money as a result of customers or counterparties being unable or unwilling to fulfil their obligations to BSF.

The Company has its own rules on which loans it can buy from its parent company. The rules are strict, which means that in principle the credit risk is low. The rules specify requirements relating to the type of loan, loan-to-value ratio, risk class and type of collateral. At the end of the first quarter of 2014, the Company’s average loan-to-value ratio was 56%, measured using the approved valuation of the collateral by Eiendomsverdi AS. The Board of Directors considers the loan portfolio to be of high quality, and to be associated with a low credit risk.

Market riskMarket risk is the risk arising from the Bank’s open positions relating to loans and financial instruments whose values fluctuate over time in response to changes in market prices. Bustadkreditt Sogn og Fjordane AS does not have any investments in shares of foreign currencies, so all of its market risk is related to interest rate risk. Bustadkreditt Sogn og Fjordane’s risk management policies set limits on its exposure to market risk. The Board considers it a priority for the Company to maintain a low exposure to market risk.

Liquidity riskLiquidity risk is the risk that the Company will be unable to fulfil its obligations and/or finance an increase in assets without significant additional cost, either because it has to realise losses on the sale of assets or because it has to make use of unusually expensive financing. The Board has decided that the Company should maintain a low exposure to liquidity risk. This is, amongst other things, reflected in the size of the required liquidity bu°er. The credit agreements with the parent company also play an important role in reducing the Company’s liquidity risk.

Operational riskOperational risk is defined as the risk of losses due to human error, external actions or failures and defects in the Company’s systems, procedures and processes.

Bustadkreditt Sogn og Fjordane AS has signed an agreement with Sparebanken Sogn og Fjordane on the provision of services in areas such as customer service, administration, IT, finance and risk management. In these areas, the parent company is responsible for resolving any mistakes and for handling the operational risk. The Board believes that it handles this area well.

OUTLOOKThe Company has started 2015 well, but it is still strongly a°ected by the fact that margins on loans to customers are under pressure due to competition in the banking market.

At the end of March 2015, house prices had risen for 15 months in a row, reaching record levels. For Bustad-kreditt Sogn og Fjordane, this reduces the average loan-to-value ratio of the loans in its portfolio.

Funding obtained through the market for covered bonds will continue to play a vital role in helping the Sparebanken Sogn og Fjordane banking group to remain competitive. We are therefore working to ensure that Bustadkreditt Sogn og Fjordane can buy a larger proportion of Sparebanken Sogn og Fjordane’s mortgage portfolio in the coming years.


Income statement

Note 31.03.15 31.03.14 31.12.14Interest income 88 795 87 191 354 122Interest expenses 49 165 46 585 198 573Net interest income 39 630 40 606 155 549

Commission income 422 260 1 359Net commission income 422 260 1 359

Net gains/losses on financial instruments – 409 – 680 – 1 133Total other operating income – 409 – 680 – 1 133

Net other operating income 13 – 420 226

Total operating income 39 643 40 186 155 775

Wages, salaries, etc. 0 0 29Administration expenses 285 296 1 441Other operating expenses 1 883 1 579 5 674Total operating expenses 2 168 1 874 7 144

Operating profit/loss before loan impairment charge 37 476 38 312 148 631

Loan impairment 3, 4, 5 – 2 862 – 5 632 – 5 126

Operating profit/loss 40 337 43 944 153 757

Tax expense 10 891 11 865 41 514

Profit/loss for the reporting period 29 446 32 079 112 243

COMPREHENSIVE INCOMEProfit/loss for the reporting period 29 446 32 079 112 243Other comprehensive income 0 0 0Comprehensive income 29 446 32 079 112 243


Balance sheet

ASSETS Note 31.03.15 31.03.14 31.12.14

Loans and advances to credit institutions 505 927 152 394 402 799Loans to customers 3, 4, 5 9 892 175 8 514 707 9 651 406Commercial paper and bonds 351 808 326 351 352 365Deferred tax assets 828 777 828Other receivables/Accrued income 8 342 9 140 9 499

Total assets 10 759 079 9 003 368 10 416 896

SHAREHOLDERS’ EQUITY AND LIABILITIESPaid-up equityShare capital 675 000 675 000 675 000Total paid-up equity 675 000 675 000 675 000

Retained earningsOther equity 7 30 644 32 934 1 198Allocated for dividends 0 0 111 900Total retained earnings 30 644 32 934 113 098

Total equity 705 644 707 934 788 098

LiabilitiesDebt to credit institutions 1 690 705 1 452 153 1 256 635Debt securities in issue 6 8 312 096 6 786 195 8 312 310Tax payable 34 721 39 845 41 566Accrued costs 15 913 17 241 18 287

Total liabilities 10 053 435 8 295 433 9 628 798

Total liabilities and equity 10 759 079 9 003 368 10 416 896

Førde, 22 April 2015The Board of Directors of Bustadkreditt Sogn og Fjordane AS

Frode VassethChair

Hallvard Klakegg Peter Midthun Ingeborg Aase Fransson

Harald SlettvollCEO


Cash flow statement

31.03.15 31.03.14 31.12.14

Profit/loss before taxation 40 337 43 944 153 757Impairment provisions for loans and guarantees – 2 862 – 5 632 – 5 126Tax paid – 17 736 – 8 805 – 41 578Reduction/increase in loans and advances to customers – 237 907 153 917 – 983 570Other non-cash transactions – 1 218 – 1 456 4 306A) Net cash flow from operating activities – 219 386 181 968 – 872 210

Reduction/increase in investments in commercial paper and bonds 557 – 16 259 – 42 274B) Net cash flow from investment activities 557 – 16 259 – 42 274

Increase/reduction in loans from credit institutions 434 071 – 91 498 – 287 016Increase/reduction in debt securities – 214 – 347 844 1 178 271Increase/reduction in paid-up share capital 0 300 000 300 000Dividends – 111 900 – 93 900 – 93 900C) Net cash flow from financing activities 321 956 – 233 242 1 097 356

D) Net cash flow during the year (A+B+C) 103 128 – 67 533 182 872

Opening balance of cash and cash equivalents 402 799 219 927 219 927Closing balance of cash and cash equivalents 505 927 152 394 402 799

Breakdown of cash and cash equivalentsDeposits at other financial institutions 505 927 152 394 402 799Total 505 927 152 394 402 799


Equity statement

PAID-UP EQUITY RETAINED EARNINGSShare Other Allocated for Total

capital equity dividends equity

Opening balance 01.01.14 375 000 94 755 0 469 755Dividends paid 0 – 93 900 0 – 93 900Profit/loss for the reporting period 0 343 111 900 112 243Equity transactionsNew paid-up equity 300 000 0 0 300 000Closing balance 31.12.14 675 000 1 198 111 900 788 098

Opening balance 01.01.15 675 000 1 198 111 900 788 098Dividends paid 0 – 111 900 – 111 900Profit/loss for the reporting period 0 29 446 0 29 446Closing balance 31.03.15 675 000 30 644 0 705 644


NOTE 1 – WAGES, SALARIES, ETC.

Bustadkreditt Sogn og Fjordane AS’s financial statements have been prepared using the simplified application of IFRS. These interim financial statements have been presented in accordance with IAS 34 “Interim Financial Reporting”. The Company has used the same accounting policies and calculation methods as at 31 December 2014.

The Ministry of Finance issued new regulations on the simplified application of IFRS on 3 March 2014. The new regulations came into force as of the 2014 financial year, but a transition arrangement allows the old regulations to be used for the 2014 and 2015 financial years. The Company has chosen to make use of the transition arrangement, and has therefore prepared the financial statements for Q1 2015 using the old regulations.

For more detailed information about accounting policies and critical accounting estimates, please see Bustadkreditt Sogn og Fjordane’s 2014 annual report. See: www.ssf.no

All figures are stated in thousands of NOK, unless otherwise specified.

NOTE 2 – SEGMENTS

The Company has one segment. This segment consists of loans to retail customers and a small volume of loans to private businesses. All of the loans have been bought from Sparebanken Sogn og Fjordane. The Company does not have any operations outside Norway. Customers with overseas addresses are classified as part of the Norwegian operations.

Notes to the accounts

NOTE 3 – LOAN IMPAIRMENT CHARGE31.03.15 31.03.14 31.12.14

Increase/reduction in individually assessed impairment provisions 0 – 283 – 283Increase/reduction in collectively assessed impairment provisions – 2 862 – 5 632 – 4 843 Losses realised during the period for which impairment provisions had previously been made 0 0 0Losses realised during the period for which impairment provisions had not previously been made 0 0 0Recoveries against previous years’ realised losses 0 0 0= Loan impairment charge for the period – 2 862 – 5 915 – 5 126

NOTE 4 – IMPAIRMENT PROVISIONS31.03.15 31.03.14 31.12.14

Individually assessed impairment provisions at the start of the period 0 283 283+ New ind. ass. provisions against previously impaired loans 0 0 0- Writebacks of individually assessed provisions from past periods 0 283 283+ Loan loss provisions against previously unimpaired loans 0 0 0- Losses realised for which individually assessed provisions had been made 0 0 0Individually assessed impairment provisions at the end of the period 0 0 0

Collectively assessed impairment provisions at start of period 9 887 14 730 14 730 + Change in collectively assessed provisions for the period – 2 862 – 5 632 – 4 843 Collectively assessed impairment provisions at end of period 7 025 9 098 9 887

Total impairment provisions at end of period 7 025 9 098 9 887


NOTE 5 – LOANS IN DEFAULT AND AT RISK OF DEFAULT31.03.15 31.03.14 31.12.14

Loans in defaultLoans more than 90 days in arrears 1 784 2 505 2 505 – individually assessed impairment provisions 0 0 0Net loans in default 1 784 2 505 2 505 Coverage ratio 0 % 0 % 0 %

Other loans at risk of defaultLoans at risk of default (not in default) 0 0 0– Individually assessed impairment provisions 0 0 0Net other loans at risk of default 0 0 0Coverage ratio 0 % 0 % 0 %

NOTE 6 – DEBT SECURITIES IN ISSUE31.03.15 31.03.14 31.12.14

Commercial paper and other short-term borrowings 0 0 0Bonds in issue 8 302 000 6 784 500 8 302 000 Own commercial paper/bonds, not amortised 0 0 0Total debt securities in issue 8 302 000 6 784 500 8 302 000

Term to maturityRemaining term to maturity (face value)2015 802 000 1 284 500 802 000 2016 1 700 000 1 700 000 1 700 000 2017 1 000 000 1 000 000 1 000 000 2018 1 800 000 1 800 000 1 800 000 2019 1 000 000 1 000 000 1 000 000 2020 2 000 000 0 2 000 000 Total 8 302 000 6 784 500 8 302 000

New borrowings in 2015 0 Repaid during the reporting period 0

MATURITY BOOK VALUE

ISIN NUMBER FACE VALUE INTEREST RATE SPREAD DATE *) 31.03.15

NO0010572290 302 000 3 MND. NIBOR 0,55 % 27.04.15 301 516 NO0010630973 500 000 3 MND. NIBOR 0,70 % 07.12.15 499 300 NO0010593155 700 000 3 MND. NIBOR 0,58 % 10.03.16 696 730 NO0010625619 1 000 000 3 MND. NIBOR 0,55 % 28.06.16 997 271 NO0010637101 1 000 000 3 MND. NIBOR 0,72 % 17.02.17 1 001 300 NO0010660020 800 000 3 MND. NIBOR 0,55 % 18.04.18 800 080 NO0010673395 1 000 000 3 MND. NIBOR 0,48 % 20.09.18 1 000 480 NO0010665177 1 000 000 3 MND. NIBOR 0,58 % 13.08.19 1 003 836 NO0010710676 2 000 000 3 MND. NIBOR 0,36 % 15.06.20 2 008 390

Amortisation 3 193 Total debt securities in issue 8 312 096

The table shows the agreed maturity date.*) The terms of the loan allow for the maturity date to be extended by one year. All loans are denominated in NOK.

All loan agreements are subject to standard loan terms.


NOTE 7 – CAPITAL ADEQUACY31.03.15 31.03.14 31.12.14

Equity and subordinated debtShare capital and share premium account 675 000 675 000 675 000Other equity 1 198 855 1 198Share of interim profit/loss 0 0 0Equity 676 198 675 855 676 198

Other core capital 0 0 0

Deductions:Deferred tax assets – 828 – 777 – 828

Net core capital 675 370 675 078 675 370Core Tier 1 capital 675 370 675 078 675 370

Net supplementary capital 0 0 0

Net equity and subordinated loan capital 675 370 675 078 675 370

BASIS FOR CALCULATION Credit riskInstitutions 101 186 30 475 78 686Retail loans 234 521 174 875 235 363Residential mortgage loans 3 541 382 3 049 075 3 452 788Overdue advances 1 810 2 663 2 791Covered bonds 32 686 27 650 32 748Other advances 341 325 412Total calculation basis for credit risk 3 911 926 3 285 063 3 802 788

Operational risk 229 697 146 838 229 697

Total calculation basis 4 141 623 3 431 900 4 032 485

Excess equity and subordinated debt 344 040 400 526 352 771

CAPITAL ADEQUACYCapital adequacy ratio 16,31 % 19,67 % 16,75 %Core capital adequacy ratio 16,31 % 19,67 % 16,75 %Core Tier 1 capital adequacy ratio 16,31 % 19,67 % 16,75 %

The capital adequacy ratio has been calculated using the new capital adequacy regulations (Basel II).The standardised approach has been used for credit risk and market risk, whilst the basic indicator approach has been used for operational risk.

There are three pillars to the Basel II regulations. Pillar 1 relates to minimum capital adequacy requirements, and builds on the previous regulations in Basel I. Pillar 2 relates to the institution’s internal assessment of total capital requirements (ICAAP), whilst Pillar 3 covers disclosure requirements for financial information.


NOTE 8 – TRANSACTIONS WITH RELATED PARTIES

Intra-group transactions31.03.15 31.03.14 31.12.14

Interest received from Sparebanken Sogn og Fjordane 1 172 920 4 515 Interest paid to Sparebanken Sogn og Fjordane 7 429 6 717 27 793 Interest paid to Sparebanken Sogn og Fjordane on covered bonds 2 018 2 778 6 332 Services bought from Sparebanken Sogn og Fjordane 1 066 930 3 808

Deposits at Sparebanken Sogn og Fjordane 505 927 152 394 402 799 Liabilities to Sparebanken Sogn og Fjordane 1 690 705 1 452 153 1 256 635 Covered bonds held by Sparebanken Sogn og Fjordane 224 917 134 623 402 458

Bustadkreditt Sogn og Fjordane AS has no employees. An agreement has been signed with Sparebanken Sogn og Fjordane on the supply of loan servicing and administrative services. All of the Company’s loans have been acquired from Sparebanken Sogn og Fjordane, and an agreement has been signed with the bank on the servicing of the portfolio. Bustadkreditt Sogn og Fjordane AS takes on all of the risk associated with the loans that it acquires from its parent. Bustadkreditt Sogn og Fjordane AS has been given access to good credit facilities with Sparebanken Sogn og Fjordane. These will allow the Company to make interest and principal payments to the owners of covered bonds, enable it to make advances to customers with flexible mortgages, provide bridge financing when loans are being transferred, and fund the necessary surplus in the cover pool.

Further details of the credit facilities:Bustadkreditt Sogn og Fjordane AS has four credit facilities with Sparebanken Sogn og Fjordane (SSF):

a) A 3-year credit that matures in June 2017. The credit facility is to be used for buying mortgage loans from SSF. It has a limit of NOK 750 million.

b) A credit agreement to ensure that owners of covered bonds will be paid even if the mortgage finance

subsidiary is unable to meet its obligations. At 31 March 2015, the agreement had a limit of NOK 1,654 million. Under the agreement, the obligations of the Bank relate to all payments due to the owners of the covered bonds over the coming year.

c) A credit facility that can be used to finance advances to customers with available credit within their flexible mortgages. At 31 March 2015 the limit on the facility was NOK 1,072 million.

d) A credit facility related to overcollateralisation. The facility shall be used to buy loans for inclusion in the cover pool, and to buy instruments that qualify as part of a liquidity bu°er. At 31 March 2015 the limit on the facility was NOK 1,247 million, but this limit depends on the volume of covered bonds issued at any given time.

All agreements adhere to arm’s length principles.

NOTE 9 – OFF BALANCE SHEET ITEMS31.03.15 31.03.14 31.12.14

Unused credit facilities 1 072 257 890 869 1 022 206 = Total contingent liabilities 1 072 257 890 869 1 022 206

The unused credit facilities are available financing in flexible mortgages.

The Company has no other o°-balance-sheet obligations.

NOTE 10 – SUBSTITUTE ASSETS31.03.15 31.03.14 31.12.14

Deposits at the parent company 505 927 152 394 402 799 Government-guaranteed commercial paper 24 950 49 840 24 885 Other commercial paper and bonds 326 858 276 511 327 480 Total substitute assets 857 735 478 745 755 164

+47b

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INFORMATION ABOUT THE COMPANY

Address:Bustadkreditt Sogn og Fjordane ASLangebruvegen 12N-6800 Førde, Norway

Tel. no.: +47 57 82 97 00

Organisation number: 946 917 990

Management:Harald Slettvoll Dagleg leiar

Board of Directors:Frode Vasseth Chair Hallvard Klakegg Board member Ingeborg Aase Fransson Board member Peter Midthun Board member

Contact person:Harald Slettvoll, CEO, tel. +47 57 82 97 52

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