Quarterly report 1st quarter 2016

Transcription

1 Quarterly report 1st quarter 2016

2 Director s report FIRST QUARTER 2016 Reduced costs, but increased losses Main points first quarter Profits before taxes were NOK -6.6 (40.5) million The interest margin was 1.46% (1.62%) If the fee to the Norwegian Investor Compensation Scheme had been accrued during the year, as in previous years, the interest margin would have been 1.58%. Net interest income was NOK 98.8 (116.8) million Total cost amounted to NOK 71.2 (83.1) million Performance of financial instruments amounted to NOK (-4.1) million Losses and writedowns amounted to NOK 45.1 (11.1) million, of which group writedowns were NOK 6.0 (0.0) million Return on equity was -1.3% (7.6%) before taxes and -0.9% (5.5%) after taxes. The Group deposit to loan ratio was 49.7% (59.1%). For the Parent Bank the ratio was 72.1% (82.9%) The Tier-1 capital ratio was 13.8% (13.2%) The Core Tier-1 capital ratio was 12.0% (11.7%) Figures in parentheses apply to the corresponding period in. Both the consolidated and the Parent Bank s financial statements are reported pursuant to IFRS. First quarter earnings In the first quarter of 2016, profits before taxes were NOK -6.6 million, compared to NOK 40.5 million during the same period in. The earnings decline may mainly be attributed to higher provisions for losses, as well as lower net interest income due to the accrual of the whole fee to the Norwegian Investor Compensation Scheme in the first quarter, as of The decline is partially offset by lower costs compared to the first quarter of. Profits after taxes were NOK -4.5 million, compared to NOK 29.5 million during the first quarter of. Return on equity before taxes was -1.3%, compared to 7.6% in the first quarter of. Return on equity after taxes was -0.9%, versus 5.5% in the first quarter of. Net interest income The group s net interest income was NOK 98.8 (116.8) million for the first quarter of The loan portfolio declined by 1.3% from the previous quarter. The interest margin was 1.46% in the first quarter of 2016, compared to 1.62% in the same quarter of. The lower interest margin is mainly due to recognizing the whole annual fee to the Norwegian Investor Compensation Scheme in the first quarter as of 2016, based on a statement from the Financial Supervisory Authority. If the fee to the Norwegian Investor Compensation Scheme had been accrued during the year, as in previous years, the interest margin would have been 1.58%. Other operating income Total other operating income amounted to NOK 10.9 million during the first quarter of This is a decline of NOK 7.0 million compared to the first quarter of. The net return on financial investments was negative to the tune of NOK 10.1 million. During the same period last year, the returns were negative in the amount of NOK 4.1 million. The decline is mainly due to weaker performance by financial instruments. Net commission income constituted NOK 14.4 million, which is NOK 1.4 million higher than in the first quarter of. Other income that is part of other operating income, fell by NOK 3.1 million relative to the first quarter of. The decline may be explained by a lower contribution from the Aktiv Eiendomsmegling Jæren AS subsidiary. Operating cost Group operating cost was NOK 71.2 million in the first quarter of This is a decline of NOK 12.0 million compared to the same period in. Payroll costs were NOK 1.2 million higher in the first quarter of Compared to the same period in, other operating cost was NOK 12.4 million lower in the first quarter of The reduction may be explained primarily by lower IT costs Sandnes Sparebank

3 Director s report in the first quarter of 2016, and by expenses in the first quarter of related to the conversion to a new IT system. Depreciation/write-downs are NOK 0.7 million lower compared to the first quarter of. For the Group, the cost to income ratio was 64.9%. This is an increase from 61.7% in the first quarter of. The total cost to total asset ratio was 1.0%, down from 1.2% in the first quarter of. Losses and non-performing loans Gross non-performing loans without revaluation totaled NOK 92.0 (163.6) million at the end of the first quarter 2016, corresponding to 0.40% (0.68%) of gross lending. Loan losses and writedowns of NOK 45.1 (11.1) million were recognized during the first quarter of As of 3/31/2016, gross lending, with individual writedowns, totaled NOK million, compared to NOK million as of 3/31/. As a percentage of gross lending, this corresponds to an increase from 2.38% as of 3/31/, to 3.04% as of 3/31/2016. The business segments The Retail Market Profits before taxes were NOK 10.0 million in the first quarter of 2016, compared to NOK 10.2 million during the same quarter in. Compared to the first quarter of, the Retail Market division recorded a reduction of net interest income of NOK 7.1 million. The decline may principally be explained by recognizing the whole annual fee to the Norwegian Investor Compensation Scheme in the first quarter as of 2016, but there have also been interest rate cuts and volume declines during the past 12 months. Net commission income is NOK 2.5 million higher compared to the corresponding quarter of. Compared to the same period in, the cost is NOK 7.9 million higher in the first quarter of Payroll costs were NOK 0.4 million higher in the first quarter of 2016, compared to the same period in. Other operating cost was NOK 7.9 million lower. The reduction may be explained primarily by lower IT costs in the first quarter of 2016, and by expenses in the first quarter of related to the conversion to a new IT system. Depreciation/writedowns are NOK 0.4 million lower. The Retail Market loan portfolio was reduced by 3.3% in the first quarter of The loan portfolio has been reduced by 4.5% during the past 12 months. As of 3/31/2016, the deposit to loan ratio was 42.4%, compared to 43.1% as of 3/31/. In the first quarter of 2016, individual writedowns of loans were increased by NOK 3.1 million, whereas group writedowns were increased by NOK 6.0 million. As of 3/31/2016, individual losses written off and group writedowns of loans totaled NOK 26.1 million and NOK 28.9 million, respectively. The Corporate Market For the corporate market, profits before taxes were NOK -6.6 million in the first quarter of 2016, compared to NOK 32.4 million during the same period in. The decline is mainly due to writedowns of loans. The corporate market experienced a decline in net interest income of NOK 11.2 million compared do the first quarter of. The earnings decline may mainly be attributed to the accrual of the whole annual fee to the Norwegian Investor Compensation Scheme in the first quarter, as of However, there has also been a planned volume decline during the past 12 months. Net commission income is NOK 0.3 million lower compared to the corresponding quarter of. Compared to the same period in, the cost is NOK 4.3 million higher in the first quarter of Payroll costs were NOK 0.1 million higher in the first quarter of 2016, compared to the same period in. Other operating cost was NOK 4.0 million lower. The reduction may be explained primarily by lower IT costs in the first quarter of 2016, and by expenses in the first quarter of related to the conversion to a new IT system. Depreciation/writedowns are NOK 0.3 million lower. The Corporate Market loan portfolio increased by 2.7% during the first quarter of The loan portfolio has been reduced by 7.7% during the past 12 months. As of 3/31/2016, the deposit to loan ratio was 58.9%, compared to 85.5% as of 3/31/. The decline is due to the expiration of municipal agreements and a few institutional deposits. Individual writedowns for loan losses were increased by a total of NOK 21.5 million in the first quarter of Writedowns of repossessed assets remained unchanged during the period. Group writedowns were also unchanged in the first quarter of As of 3/31/2016, individual writedowns and group Sandnes Sparebank

4 Director s report writedowns of loans totaled NOK million and NOK 62 million, respectively. Real estate brokerage For the real estate brokerage, there was a loss before taxes of NOK 0.5 million in the first quarter of 2016, compared to profits of NOK 2.2 million during the first quarter of. Other segments Other segments include the performance by the Group s securities portfolio, as well as directors fees and administrative cost related to functions reporting to the Board of Directors. Repossessed assets are also included. For the other segments, there was a loss before taxes of NOK 9.5 million in the first quarter of 2016, compared to a negative contribution of NOK 4.4 million in the first quarter of. The decline is mainly due to negative performance by financial instruments. Balance sheet Group total assets were NOK 27.2 (29.6) billion at the end of the first quarter of This corresponds to a decline of 8.3% compared to the same period in. The loan portfolio declined by 1.3% compared to the prior quarter, whereas deposits declined by 2.1%. During the past 12 months there has been an increase in lending of 4.7%, and a decline in deposits of 20.7%. The deposit decline is due to the expiration of municipal agreements and a few institutional deposits. Net lending of SSB Boligkreditt constitutes a volume of NOK 7.0 billion, unchanged compared to the fourth quarter of. Notes and bonds were valued at NOK 2,620.6 (3,443.9) million, while equities were valued at NOK (483.1) million. Financial derivatives amounted to NOK (276.6) million, and financial instruments classified as available for sale totaled NOK (256.5) million. The Bank s liquidity situation is good. As of 3/31/2016, SSB Boligkreditt AS has issued covered bonds worth NOK 6.6 billion. Solvency At Group level, the capital ratio improved from 15.0% as of 3/31/, to 15.9% as of 3/31/2016. Correspondingly, the Tier-1 capital ratio has increased from 13.2% as of 3/31/ to 13.8% as of 3/31/2016. As of 3/31/2016 the Group has a Core Tier-1 ratio of 12.0%, compared to 11.7% as of 3/31/ and 12.1% as of 12/31/. For the Parent Bank, the capital ratio was 17.1% as of 3/31/2016, compared to 16.5% as of 3/31/. Correspondingly, the Tier-1 capital ratio was 14.7%, versus 14.5% as of 3/31/. As of 3/31/2016, the core Tier-1 capital ratio was 12.6%, compared to 12.8% as of 3/31/ and 12.8% as of 12/31/. The Bank s equity certificates (SADG) As of 3/31/2016, the SADG price was NOK 68.00, compared to NOK as of 3/31/. At the end of the first quarter 2016, the registry showed 2,054 owners of the Bank s equity certificates. At this point in time, the 20 biggest owners controlled 48.46% of the equity certificate capital. 20 biggest equity certificate owners a s of 3/31/2016 Number of equity certificates % of total 1. Sparebank 1 SR-Bank C/O SR-Investering 985, Merrill Lynch 537, Wimoh Invest AS 261, Espedal & Co AS 218, Clipper AS 218, Eika Utbytte VPF C/O Eika Kapitalforvaltning 189, Kjell Madland 178, Bergen Kommunale Pensjonskasse 129, Skagenkaien Holding 100, Sletthei AS Leif Inge 100, Nordhaug Invest AS 98, Tirna Holding AS 62, Nordic Private Equity 60, Kristian Falnes AS 50, Jal Holding AS 50, RWA Invest AS 43, Noer Åse Marie 40, MP Pensjon PK 40, Bergtor AS 40, Parra Eiendom AS 40, = 20 biggest owners 3,443, Other owners 3,662, = Total equity capital certificates 7,105, Sandnes Sparebank

5 Director s report The total number of equity certificates of 7,105,811, includes holdings of 5,898 treasury equity certificates as of 3/31/2016. The Board of Directors wants to contribute to improved liquidity for the equity certificate. Thus, the Bank has a liquidity guarantee agreement with an external party. Accounting policies Sandnes Sparebank prepares its group and Parent Bank financial statements in compliance with the International Financial Reporting Standards (IFRS), as approved by the EU. A further description of the accounting principles applied can be found in the notes to the annual financial statements, as well as in note 1 to the quarterly financial statements for the first quarter of Market conditions The global economy did not experience any great changes during the first quarter of 2016, neither in the U.S. nor the EU. The U.S. labor market is still improving and the Federal Reserve kept the policy rate unchanged. In the EU, the central bank cut the interest rate further, and expanded its securities purchasing and its bank support programs. GDP growth estimates remains unchanged for the U.S. (2.6%), while it went up by 0.2% for the Euro zone, to 1.7%. The S&P-500, the U.S. stock index, remained virtually unchanged during the quarter. The index was down by more than 11% halfway through the quarter, but recovered towards the end. The Norwegian Krone strengthened some during the quarter, following the oil price higher. The NOK strengthened 1.5% versus the EUR and 6.1% versus the USD. During last year, China s economy faced headwinds, but there have been signs of improvement at the start of the year. The demand for raw materials rose during the quarter, which indicates continued growth in China. The estimate for the growth of the Chinese economy is now 6% year-on-year. However, in total, there are several uncertainties related to the development of the Chinese economy. Growth is expected to diminish further in the years ahead, and it is of great importance for the global economy whether the decline is gradual or sudden. The commodity markets were volatile throughout the quarter. The price of raw oil started the year below 40 dollars and fell to under 30 towards the end of January. It ended the quarter right back at just below 40 dollars. Volatile commodity prices have also had an impact on currency exchange rates and stock exchanges. The Oslo Stock Exchange was down 3.8% during the quarter. The market for senior bank bonds improved a little in the second half of the first quarter, with a bit better liquidity and somewhat better credit premiums. The first half of the quarter was characterized by increased credit premiums. For Sandnes Sparebank, the indicated credit premium for 5-year financing fell from +153 basis points at the start of the quarter to +151 bps at the end of the quarter. For SSB Boligkreditt, the indicated credit premium for 5-year financing increased from +83 basis points to +91 basis points during the quarter. 3 Month NIBOR was at 1.12% at the start of the quarter and at 1.00% when it ended. The average NIBOR was 1.09% versus 1.13% during the previous quarter. Long interest rates have been falling throughout the quarter. The 10-year swap rate fell from 1.86% at the start of the quarter to 1.41% at the end of the quarter. The business community in the region is marked by extensive cost cutting and restructuring within the oil / oil service business. Many companies are adapting to a lower level of activity on the Norwegian continental shelf. Consequently, there are an increasing number that are directing their deliveries towards other industries than the oil business. This will probably lead to somewhat lower profitability in the short term. In the longer term, this will contribute to maintaining the competencies developed in the region, as well as ensuring a more stable activity level. Within commercial real estate, leading market players report vacancy rates of just over 10% in the region. Forus is currently the area with the highest level of vacancy, with a vacancy rate of approximately 13%. The result of this is falling rent levels. We expect that the market for the rental and sale of commercial real estate will remain challenging also in Unemployment in Rogaland saw an uptick, from 4.3% at the end of the fourth quarter to 4.7% at the end of the first quarter of Unemployment for Norway as a whole has increased from 3.0% to 3.3%. Rogaland is the county with the highest unemployment rate. Sandnes Sparebank

6 Director s report During the first quarter of 2016, housing prices in Norway as a whole, increased by 5.2% (not seasonally adjusted), according to housing price statics from the Norwegian Association of Real Estate Agents. In Rogaland, the change last quarter was 2.8%. Changes for Sandnes and Stavanger were 2.1% and 1.3%, respectively. The sale execution time for Norway as a whole has gone from 54 days to 37 during the last quarter. In Rogaland, the sale execution time is 78 days. The market in the Bank s primary catchment area is considered stable, but we expect rising unemployment and falling home prices in Outlook Sandnes Sparebank starts 2016 with a significantly lower cost base and a good basis for increased sales of the Eika Gruppen product range. When the annual financial statements for were finalized, NOK 154,4 million of increased writedowns were recognized. After the bank s fourth quarter results and preliminary figures for was prepared 2/26/2016, two significant events occurred which changed the assumptions for loss provisions made by year-end. In the first quarter, the Bank has also chosen to write down further NOK 45.1 million. This is due to the weak trend in the market caused by reduced activity in the oil industry. Increased writedowns of loans has made it more difficult to achieve the future capital adequacy objective of 14.5% through balance sheet management and internal measures. Therefore, the Board of Directors has proposed to offer an issue of NOK 350 million. This will be implemented in the second quarter of If the issue amount were included as of 12/31/, the core Tier-1 capital ratio would have been 14.2%. After this issue, the Bank will be capitalized in line with expected future objectives, and well equipped to meet the challenges facing the region. The Bank s liquidity is good, and outstanding debt maturing in the next two years, is limited. The objective of total Group costs for 2016 of NOK 290 million, is maintained. For 2016, total provisions for losses are expected to increase to around 45 basis points. After the capital injection, the Bank will be well capitalized and be in a position to pursue prudent profitable growth. The Board of Directors expects good and stable earnings in the underlying banking operations. Sandnes, April 20, 2016 The Board of Directors of Sandnes Sparebank Harald Espedal Chairman of the Board Frode Svaboe Deputy Chairman Nils H. Birkeland Director Trine Karin Stangeland Director Marion Svihus Director Arne Lee Norheim Director Jan Inge Aarreberg Employee representative Svein Ivar Førland Managing Director Sandnes Sparebank

7 Key financial figures per Group Parent bank 2016 Year Summary of results (Amounts in NOK thousands) Net interests income Other operating revenues Other operating expenses Net losses Operating profit before taxes Tax cost and discontinuing operations Operating profit after taxes Other income and expenses (after taxes) Total comprehensive income Attributable to equity certificate owners Attributable to non controlling interests Year Summary of balance (Amounts in NOK millions) Total assets Average total assets Loans to customers Deposits from customers Notes and bonds Financial derivatives Equity Year Key figures Development last quarter / 12 months ,4 % 2,8 % -5,3 % - Total assets -1,5 % 3,0 % -8,0 % -1,3 % 0,0 % -3,4 % - Loans -1,8 % 0,0 % -6,1 % -2,1 % -1,5 % -20,3 % - Deposits -2,2 % -1,2 % -20,4 % 49,7 % 59,1 % 50,0 % Ratio of deposits to loans 72,1 % 82,9 % 72,1 % Profitability 1,46 % 1,62 % 1,60 % Interest margin 1,51 % 1,56 % 1,59 % 64,9 % 61,7 % 80,9 % Cost / income ratio 68,7 % 70,6 % 92,3 % 1,0 % 1,2 % 1,4 % Costs as a percentage of average total assets 1,2 % 1,3 % 1,7 % -1,3 % 7,6 % -5,2 % Return on equity before tax -3,3 % 4,1 % -9,7 % -0,9 % 5,5 % -3,5 % Return on equity after tax -2,4 % 2,9 % -7,4 % Solidity 15,9 % 15,0 % 15,9 % Capital adequacy ratio 17,1 % 16,5 % 17,1 % 13,8 % 13,2 % 13,8 % Tier 1 capital ratio 14,7 % 14,5 % 14,8 % 12,0 % 11,7 % 12,1 % Core Tier 1 ratio 12,6 % 12,8 % 12,8 % Risk-weighted assets Personnel Number of man-years as of the period Equity certificates 68, ,3 Market price 68,0 100,0 68,3 58,6 % 57,2 % 58,5 % Equity certificate capital in % of equity 58,6 % 57,2 % 58,5 % -0,4 2,4-2,2 Earnings per equity certificate -0,9 1,2-4,2-0,4 2,4-2,2 Diluted earnings per equity certificate -0,9 1,2-4,2 171,4 176,4 171,4 Book value per equity certificate 154,6 165,0 155,1 0,40 0,57 0,40 Price/Book (P/B) 0,44 0,61 0,44 Year Sandnes Sparebank

8 Profit and loss statement Group Amounts in NOK thousands Note 2016 Year Interest income Interest expense Net interest income Commissions and income from banking services Commission costs and costs of banking services Dividends Net change in value on financial instruments at fair value Other operating revenues Total other operating revenues Salaries Other operating costs Depreciations and impairment Total operating costs Write downs and losses on lending and guarantees Write-down on repossessed assets Operating profit before taxes Tax cost Operating profit after taxes Other comprehensive income Items not to be reclassified to profit or loss in subsequent periods Actuarial gains/(losses) on defined benefit plans -232 Income tax effect -58 Sum -174 Other comprehensive income to be reclassified to profit or loss in subsequent periods Net (loss)/gain on available-for-sale financial asets Income tax effect Sum Other income and expenses (after taxes) Total comprehensive income Attributable to SSB Shareholders Attributable to non controlling interests Earnigs per equity certificate -0,4 2,4-2,2 Diluted earnings per equity certificate -0,4 2,4-2,2 Sandnes Sparebank

9 Profit and loss statement Parent bank Amounts in NOK thousands Note 2016 Year Interest income Interest expense Net interest income Commissions and income from banking services Commission costs and costs of banking services Dividends Net change in value on financial instruments at fair value Other operating revenues Total other operating revenues Salaries Other operating costs Depreciations and impairment Total operating costs Write downs and losses on lending and guarantees Operating profit before taxes Tax cost Operating profit after taxes Other comprehensive income Items not to be reclassified to profit or loss in subsequent periods Actuarial gains/(losses) on defined benefit plans -232 Income tax effect -58 Sum -174 Other comprehensive income to be reclassified to profit or loss in subsequent periods Net (loss)/gain on available-for-sale financial asets Income tax effect Sum Other income and expenses (after taxes) Total comprehensive income Earnigs per equity certificate -0,9 1,2-4,2 Diluted earnings per equity certificate -0,9 1,2-4,2 Sandnes Sparebank

10 Balance sheet Group Parent bank Amounts in NOK thousands Note Cash and deposits with central banks 7, Loans to and receivables from credit institutions 7, Loans to customers 7, Notes and bonds 7, Equities 7, Financial derivatives 7, Investments in group companies Intangible assets Deferred tax assets Fixed assets Other assets Prepaid expenses and accrued income 7, Financial instruments available for sale 7, Total assets Loans and deposits from credit institutions 7, Deposits from customers 7, Debts securities issued 7, Financial derivatives 7, Other debts Taxes payable Deferred tax liablities Accrued expenses and prepaid income 7, Provisions 7, Subordinated loan capital 7, Total liabilities Equity certificate capital Own equity certificate Share premium Dividend equalisation reserve Savings bank's fund Gift fund Reserves for unrealized gains Available for sale reserves Other equity Non controlling interests Total equity Total equity and liablities Sandnes Sparebank

11 Cash flow statement Group Parent bank Jan-Mar 2016 Jan-Mar Year Amounts in NOK thousands Cash flow from operating activities Jan-Mar 2016 Jan-Mar Year Interest / commission received and fees received from customers Interest paid to customers Net payments and receipts from trading in financial assets Dividend received Interest received on securities Disbursements for operations Taxes Gifts Net cash flow from operating activities Cash flow from investing activities Purchases and divestments of fixed assets Purchases of long-term investments in equity and other assets Net cash flows from interest bearing securities Net cash flow from investing activities Cash flow from funding activities Net receipts / disbursements of repayment loans, credit lines Net receipt of deposits Net investmetns / borrowing in credit institutions Certificates and bond depts issued Certificates and bond depts repaid Dividend Net interest payments on financing activities Net cash flow from funding activities Net cash flow for the period Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Sandnes Sparebank

12 Statement of equity Group Equity certificate capital Own certificate capital Share premium Dividend equalization reserve The Savings bank s fund Gift fund Reserves for unrealized gains Retained earnings Available for sale reserves Total Noncontrolling ownership interests Total equity capital Equity as of Dividends Gifts Actuarial gains/(losses) on defined benefit plans (after tax) Reserves for unrealized gains Available for sale financial instruments Own equity certificate capital Additions, non-controlling ownership interest Annual profits allocated to EC fund Annual profits alloctaed to gift fund Profit or loss Group Equity as of Equity as of Gifts Reserves for unrealized gains Own equity certificate capital Profit or loss Group Equity as of Sandnes Sparebank

13 Statement of equity Parent bank Egenkapitalbeviskapital Egne egenkapitalbevis Overkurs Utjevningsfond Sparebankens fond Gavefond Fond for urealiserte gevinster Annen egenkapital Tilgjengelig for salg reserve Sum egenkapital Equity as of Dividends Gifts Actuarial gains/(losses) on defined benefit plans (after tax) Reserves for unrealized gains Available for sale financial instruments Own equity certificate capital Annual profits allocated to EC fund Annual profits alloctaed to gift fund Profit or loss Equity as of Equity as of Gifts Reserves for unrealized gains Own equity certificate capital Profit or loss Equity as of On the 26th of March The Board of Trustees authorized the Board of Sandnes Sparebank to buy ECslimited to total nominal value of million, corresponding to 10 % of the equity certificate capital. Each ECs can be purchased at prices between 1 and 150, respectively. This authorization is valid up to and including ordinary Board of Trustees meeting in 2016, however not longer than 18 months from the date that the authorization is granted. As of Sandnes Sparebank owns ECCs, and are purchased as part of the incentive program in the bank. Sandnes Sparebank

14 Notes 1 GENERAL ACCOUNTING POLICIES General The consolidated financial statements for the first quarter 2016 for Sandnes Sparebank has been prepared in accorandance with International Financial Reporting Standards (IFRS) as approved by the EU, including IAS 34 Interim financial reporting. The accounting principles used has been described in the annual report for. New or revised accounting standards with effect from 1st quarter 2016: IFRIC 21- expensing tax liabilities The interpretation addresses the accounting for liabilities related to tax payments, and is therefore relevant when assessing the accounting treatment of the guarantee fund charge. The interpretation has been effective from , but it has been a debate within the industry on whether this affects the monthly accounting accrual practice related to the guarantee fund charge. The Financial Supervisory Authority of Norway came at the end of to the conclusion that since there are no provisions to shorten the charge if banks leaves the scheme during the year, the entire guarantee fund charge has to be recognized in the first quarter of each year. The interest expense is thus charged with NOK 11.5 million in the first quarter of 2016, while it according to earlier practice would have 2.9 million. Application of estimates The preparation of accounts in compliance with generally accepted accounting principles in some cases requires the management to apply estimates and assumptions. The estimates are based on historical experience and assumptions that management consider reasonable and prudent. The estimates and valutaions on which decisions are based affect the recognised amounts of assets, debts and liabilities, as well as income and costs in the accounts. Actual results may subsequently differ to some extent from the estimates and assumptions. The same estimates and assumptions that were described in the annual report for, have been applied while preparing the accounts as of CHANGES IN GROUP STRUCTURE No changes in first quarter Sandnes Sparebank

15 Notes 3 SEGMENT REPORTING The Group has three segments, Retail Market (RM), Corporate Market (CM) and Estate Agency. RM and CM are a banking business divided between two main customer groups. They also include general investment advice to the Bank s customers. The estate agency segment consist of the subsidiary Aktiv Eiendomsmegling Jæren AS, which is a result of the merger between the subsidiary Sandnes Eiendom AS and Aktiv Eiendomsmegling Jæren AS in March. The segment operates as an estate agency. Other business includes the the repossessed company Røldal Eiendom AS/IS, which is under liquidation. Also included are the company SSB Private Equity II. The repossessed company Breibukta AS/IS was wound up in fourth quarter. The accounting principles applied in the preparation of the segment information are the same as is used for the accounts generally. The Group does not distribute tax or non-repeating gains or losses on the segments. The Group recognizes intra-group transactions on an arm s length basis. Funding cost is allocated according to capital requirements on RM and CM, respectively. Net commission income is distributed according to sales volume, and common costs according to a cost distribution formula. RM CM Property Undistributed Total Net external interest income Net internal interest income Net interest income Net commissions Financial instruments at fair value Other revenues Total other operating revenues Personell cost Other operation cost Depreciations and impairment Profit before loss provisions Write down and losses on lending Write-down on repossessed assets Operating profit before tax Loans to customers Other assets Total assets Deposits from customers Other liabilities Debt and liabilities Sandnes Sparebank

16 Notes 4 LOSSES Group Parent bank 2016 Year Writedowns and losses on loans Change in individual write-downs Change in group write-downs Write-offs with individual write-downs Write-offs without individual write-downs Recoveries on amounts written off previously Writedowns and losses on loans Year Writedowns of loans Individual writedowns as of Confirmations against previous writedowns Increased individual writedowns New individual writedowns Reversed writedowns Individual writedowns as of / Group writedowns as of Transferred to SSB Boligkreditt Increase in group writedown Group writedowns as of / Losses and non-performing loans and advances ,40 % 0,68 % 0,36 % Non-performing loans and advances without write-downs Non-performing loans and advances without write-downs as a percentage of gross loans 0,58 % 0,94 % 0,51 % Doubtful loans and advances Individual write-downs Net doutful loans and advances Non-performing loans and advances are loans and advances that are non-performed for more than 90 days. Doubtful loans and advances are loans and advances that has been impaired. of which ( ) is non-perfomed. The bank does not report a loan or advance on both lines. If a loan or advance is impaired, it is reported under the line doubtful loans and advances regardless of whether it has been non-performed or not. Sandnes Sparebank

17 Notes 5 CAPITAL ADEQUACY Group Parent bank Net subordinated capital Equity certificate capital Own equity certificate capital Saving bank's fund Other equity Equity Deduction for ownership in non-significant investments in the financial sector Transitional rule for non-significant investments Deduction for goodwill and other intangible assets Total core tier 1 capital Subordinated tier 1 bonds Deduction for ownership in non-significant investments in the financial sector Transitional rule for non-significant investments in the financial sector Total tier 1 capital Subordinated loan capital Deduction for ownership in non-significant investments in the financial sector Transitional rule for non-significant investments Net subordinated capital Risk-weighted assets: Market Risk - - standard method Credit risk - standard method Operational risk Cva addition Total risk-weighted assets ,9 15,0 15,9 Capital adequacy ratio 17,1 16,5 17,1 13,8 13,2 13,8 Tier 1 capital ratio 14,7 14,5 14,8 12,0 11,7 12,1 Core Tier 1 ratio 12,6 12,8 12,8 Sandnes Sparebank

18 Notes Group Parent bank Specification of calculation base Standard method Market risk Local and regional authorities Institutions Companies Mass marked Loans secured by real estate Overdue loans High risk loans Covered bonds Fund units Equity positions Others Credit risk Operational risk CVA surcharge Total calculation base Sandnes Sparebank

19 Notes 6 NET CHANGE OF VALUE AND GAINS/LOSSES ON CURRENCY AND SECURITIES VALUED AS CURRENT ASSETS Group Parent bank 2016 Year Net change in valuation of financial instruments at fair value 2016 Year Net change in valuation of currency and financial derivatives Net change in valuation of loans at fair value Net change in valuation of notes and bonds Net change in valuation of equities Net change in valuation of financial liabilities Net change in valuation of financial instruments, determined recognized at fair value Net change in valuation of financial derivatives, hedging Net change in valuation of hedged financial liabilities Net change in valuation of hedged items Net change in valuation of financial instruments at fair value Sandnes Sparebank

20 Notes 7 CLASSIFICATION OF FINANSIAL INSTRUMENTS Group Assets Financial assets and liabilities valued at amortized cost Financial instruments at fair value through the income statement Trading portfolio Decided recognized at fair value Financial derivatives as hedging instruments Financial assets held for sale Nonfinancial assets and liabilities Cash and deposits with central banks Loans to and claims on credit institutions Loans to customers Notes and bonds Equities Financial derivatives Accrued income Financial instruments for sale Other assets Total assets Total Liabilities Payable to credit institutions Deposits from customers Debt securities Financial derivatives Accrued cost Subordinated loan capital Other liabilities Accruals Total liabilities Sandnes Sparebank

21 Notes Group Assets Financial assets and liabilities valued at amortized cost Financial instruments at fair value through the income statement Trading portfolio Decided recognized at fair value Financial derivatives as hedging instruments Financial assets held for sale Nonfinancial assets and liabilities Cash and deposits with central banks Loans to and claims on credit institutions Loans to customers Notes and bonds Equities Financial derivatives Accrued income Financial instruments for sale Other assets Total assets Total Liabilities Payable to credit institutions Deposits from customers Debt securities Financial derivatives Accrued cost Subordinated loan capital Other liabilities Accruals Total liabilities Sandnes Sparebank

22 Notes Group Assets Financial assets and liabilities valued at amortized cost Financial instruments at fair value through the income statement Trading portfolio Decided recognized at fair value Financial derivatives as hedging instruments Financial assets held for sale Nonfinancial assets and liabilities Cash and deposits with central banks Loans to and claims on credit institutions Loans to customers Notes and bonds Equities Financial derivatives Accrued income Financial instruments for sale Other assets Total assets Total Liabilities Payable to credit institutions Deposits from customers Debt securities Financial derivatives Accrued cost Subordinated loan capital Other liabilities Accruals Total liabilities Sandnes Sparebank

23 Notes 8 FAIR VALUE OF FINANCIAL INSTRUMENTS Group Assets Recognized value in the balance sheet Fair value Recognized value in the balance sheet Fair value Recognized value in the balance sheet Cash and deposits with central banks Loans to and claims on credit institutions Loans to customers Accrued income Total assets Fair value Liabilities Payable to credit institutions Deposits from and payable to customers Debt established through the issue of securities Accrued expenses Subordinated loan capital Total liabilities Determination of fair value at the end of the period pursuant to the valuation hierarchy Group Level 1 Level 2 Level 3 Financial instruments at fair value through the income statement Total as of Loans to customers Notes and bonds Equities Financial derivatives Financial derivatives, hedging instrument Financial instruments available for sale Equities Total Financial instruments at fair value through the income statement Deposits from customers Financial derivatives Financial derivatives, hedging instrument Total Sandnes Sparebank

24 Notes Determination of fair value at the end of the period pursuant to the valuation hierarchy Group Level 1 Level 2 Level 3 Financial instruments at fair value through the income statement Total as of Loans to customers Notes and bonds Equities Financial derivatives Financial derivatives, hedging instrument Financial instruments available for sale Equities Total Financial instruments at fair value through the income statement Deposits from customers Financial derivatives Financial derivatives, hedging instrument Total Determination of fair value at the end of the period pursuant to the valuation hierarchy Group Level 1 Level 2 Level 3 Financial instruments at fair value through the income statement Totalt per Loans to customers Notes and bonds Equities Financial derivatives Financial derivatives, hedging instrument Financial instruments available for sale Equities Total Financial instruments at fair value through the income statement Deposits from customers Financial derivatives Financial derivatives, hedging instrument Total Sandnes Sparebank