Annual Report 2012, Ringkjøbing Landbobank A/S

Please visit www.landbobanken.com to download the Annual Report 2012 in pdf.

Disclaimer:
»The following is a translation of a Danish original document. The original Danish text shall be the governing text for all purposes and in case of any discrepancy the Danish wording shall be applicable.«
 

Dear shareholder

Viewed as a whole, 2012 was a really good year for Ringkjøbing Landbobank. The pre-tax profit improved by 18% to DKK 448 million, equivalent to a 19% return on the bank’s equity. The bank’s core earnings were DKK 401 million, which is above the expected range reported at the beginning of the year. This result was achieved on the basis of growth in customer numbers, the bank’s low rate of costs and a continuing sound credit quality. To this must be added positive exchange rate adjustments, realised because the interest rate fell to a historically low level.

The falling interest rate was characteristic of the lack of growth in Denmark and through- out Europe, while the difference between northern and southern Europe became even more marked as the debt crisis took hold. We expect that Denmark will come out of recession in 2013, but without growth rates being high enough to enable us to escape a period of low growth.

The price of the bank’s shares in 2012 performed better than that of any other Danish bank, with an increase of 35% including the dividend paid, and the market value is now DKK 3.9 billion. It is recommended to the general meeting that the dividend be increased to DKK 14 per share, and that we continue with a new buy-back programme for 130,000 shares.

The bank’s rate of costs was 32%, and we thus remain the most efficient bank in Denmark in terms of costs per krone earned. We’re pleased with this situation because it makes our results highly robust, which benefits all our stakeholders.

Robustness, profit and solvency remain important for our customers and their choice of bank. We have noted this during the past year, when we gained many new customers who want their capital managed or placed. We are therefore very satisfied with the bank’s solid capitalisation. The bank’s solvency is 22%, which should be seen in relation to the statutory requirement of 8%. The high solvency and the bank’s earnings mean that Ring- kjøbing Landbobank is one of Denmark’s most robust banks. We thus have the strength we need to support our customers and their good investments.

This result and our sound basis is also a credit to our competent employees, who again performed fantastically in 2012. Their expertise, stability, loyalty and fighting spirit are an unsurpassed combination.

We expect 2013 to be an interesting year, where the main task will be to do even more business with our current customers and continue to increase our market share with ad- ditional customers. We expect core earnings in the range DKK 350 - 425 million, to which must be added the result for the trading portfolio.

Finally, we would like to thank our customers and shareholders for the high level of sup- port they give the bank.

John Bull Fisker
 

   

Main figures for the bank (million DKK)
 
2012 2011 2010 2009 2008
 
Total core income 823 767 758 753 735
Total costs and depreciations -265 -248 -240 -238 -239
Core earnings before write-downs on loans 558 519 518 515 496
Write-downs on loans -157 -129 -138 -159 -77
Core earnings 401 390 380 356 419
Result for portfolio +49 +1 +38 +56 -73
Expenses for bank packages -2 -11 -80 -107 -28
Profit before tax 448 380 338 305 318
Profit after tax 328 286 257 232 240

Shareholders’equity 2,676 2,483 2,312 2,056 1,785
Deposits 12,867  12,755  11,662  11,187 9,073
Loans 12,424  12,747  13,151  13,047  13,897
Balance sheet total 17,682  17,549  18,247  17,928  18,002
Guarantees 1,667 1,052 1,042 1,486 2,386

Key figures for the bank (per cent)
Pre-tax return on equity, beginning of year 18.5 16.9 16.5 17.1 19.6
Return on equity after tax, beginning of year 13.6 12.7 12.5 13.0 14.7
Rate of costs 32.2 32.4 31.6 31.6 32.4
Core capital ratio (Tier 1) 20.9 19.8 18.6 16.6 13.0
Solvency ratio (Tier 2) 22.4 21.4 22.4 20.2 16.3
Solvency requirement 8.0 8.0 8.0 8.0 8.0

Key figures per 5 DKK share (DKK)
Core earnings 83 79 75 71 83
Profit before tax  93  77  67  60  63
Profit after tax  68  58  51  46  48
Net asset value 553 503 459 408 354
Price, end of year 770 579 725 609 310
Dividend 14 13 12 0 0

ANNUAL REPORT - HIGHLIGHTS

•   18% increase in pre-tax profit from DKK 380 million to DKK 448 million
•   The result is equivalent to a 19% return on equity after payment of dividends 
•   The rate of costs improved by 1% to 32.2, still the lowest in Denmark
•   Capital adequacy ratio of 22.4, equivalent to cover of 280%
•   Core capital ratio 20.9
•   Highly satisfactory number of new customers in both the branch network and Private Banking
•   Positive - 35% - return on the bank’s shares
•   A dividend of DKK 14 per share, equivalent to DKK 70 million, is recommended
•   Cancellation of 100,000 bought back shares recommended to the general meeting
•   New buy-back programme for 130,000 shares, equivalent to approximately DKK 105 million, proposed
•   Expectations for core earnings for 2013 in the range DKK 350 - 425 million
 

 

 

Page
6 Financial review
15 Capital structure
18 Risks and risk management
30 Corporate Governance
31 Statutory statement on social responsibility
34 Statutory statement on management
36 Information on listed companies
 

Financial review
The bank’s pre-tax profit improved by 18% from DKK 380 million to DKK 448 million. This result is equivalent to a 19% return on equity, which is considered highly satisfac- tory in the present economic situation.
The core earnings increased by 3% to DKK 401 million, which is above the expected range reported at the beginning of the year.

Core income
The total core income was 7% higher, with an increase from DKK 767 million in 2011 to DKK 823 million in 2012.

Net interest income in 2012 was DKK 615 million, a 1% increase relative to the previous year. The increasing interest income comes primarily from a slightly higher interest mar- gin. Like the rest of the financial sector, the bank increased the interest margin in 2012. The very low level of interest is pulling in the opposite direction, resulting in a lower return on the bank’s securities portfolio and its liquid resources.

Net fees and commissions and foreign exchange income were derived as follows:

Million DKK 2012 2011
Asset management 71 50
Securities trading 24 19
Guarantee commissions 41 35
Foreign exchange income 13 18
Payment handling 18 17
Loan fees 12 6
Other fees and commissions 20 7
Total 199 152
 

Fees, commissions and earnings on foreign currency amounted to net DKK 199 million in 2012 against net DKK 152 million in 2011, a 31% increase. The higher sums within asset management and the pension area had a positive effect, and there was good activity within conversion of mortgage credit loans.

Costs and depreciations
The total costs including depreciations of tangible assets were DKK 265 million in 2012, 6% higher than in the previous year.
Half of the increase is the new fixed premium payable to the Guarantee Fund for De- positors and Investors which, from 2012, was charged as an expense under costs. It was decided as a part of Bank Package IV to establish an insurance scheme with a premium determined relative to the deposits which are covered. DKK 1,950 million is payable an- nually to the fund, of which the bank’s share is currently 0.7%, equivalent to DKK 13.8 million a year. Contributions will be payable to the fund until it has reached DKK 7,500 million. Future costs of the Guarantee Fund for Depositors and Investors will be financed by the payments, so it is not possible to determine how long this charge will continue. On the other hand, the fluctuating costs of bank rescues will disappear in the future. DKK 8.6 million was charged to expenses in 2012, and this will increase to DKK 13.8 million in 2013.

The rate of costs improved by 0.2 percentage points to 32.2%, which is an improve- ment of 1%, still the lowest in Denmark. A low rate of costs is particularly important in periods of difficult economic conditions as it gives a high level of robustness to the bank’s results, as is also reflected in the calculation of the bank’s individual solvency requirements of 8%.

Write-downs on loans
Write-downs on loans amounted to DKK 157 million against DKK 129 million in 2011. The level of write-downs remains acceptable and corresponds to 1.1% of total average loans, write-downs, guarantees and provisions. The bank’s customers appear to be cop- ing better than the average in Denmark in the weak economic period. DKK 33 million was charged as an expense in the fourth quarter against DKK 45 million in the third quarter and DKK 55 million in the second quarter of 2012.
The bank’s total account for write-downs and provisions was DKK 758 million at the end of 2012, equivalent to 5.1% of total loans and guarantees. The actual write-downs on loans (including interest on the account for write-downs and provisions) remain low at DKK 48 million. The account for write-downs and provisions thus increased by net DKK
109 million net during the year.
The portfolio of loans with discontinued calculation of interest was DKK 113 million,
equivalent to 0.76% of the bank’s total loans and guarantees at the end of the year.
The Danish economy slipped back into recession in 2012, but it is expected to return to positive growth rates in 2013, and the bank is satisfied with the conservative credit policy on the basis of which it has always been run. As a natural part of the economic cycle, the bank’s losses are expected to remain at a relatively high level in 2013, but at a lower level than in 2012. It is also still the bank’s judgment that its credit policy, diversi- fied loans portfolio and position in central and western Jutland will have a positive effect on the bank relative to the general level of losses for the banking sector as a whole.

Core earnings
Million DKK 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Total core income 823 767 758 753 735 696 609 511 417 368
Total costs etc. -265  -248  -240  -238  -239  -234  -208  -190  -184  -163
Core earnings before
write-downs on loans 558 519 518 515 496 462 401 321 233 205
Write-downs on loans -157  -129  -138  -159 -77 +11 +69 +5 +4 -10
Core earnings 401 390 380 356 419 473 470 326 237 195

The bank’s expectations for core earnings were originally in the DKK 300 - 400 million range. This was stated more precisely at the end of October at approximately DKK 400 million. The result was realised over the reported interval.

Result for portfolio
The result for the portfolio for 2012 was positive at DKK 49 million including funding costs.
The portfolio of shares etc. was DKK 230 million at the end of 2012, with DKK 29 million in listed shares and DKK 201 million in sector shares etc. The bond portfolio amounted to DKK 3,783 million kroner, and the greater part of the portfolio consists of AAA-rated Danish mortgage credit bonds and short-term bank bonds with rated Nordic counterparties.
The total interest rate risk - calculated as the impact on the result of a one percentage point change in the interest rate - was 0.6% of the bank’s core capital less deductions at the end of the year.
 

The bank’s total market risk within exposures to interest rate risk, listed shares etc. and foreign currency remains at a low level. The bank’s risk of losses calculated on the basis of a Value at Risk model (calculated with a ten day horizon and 99% probability) was as follows in 2012:

Value at Risk  Risk relative to equity
 Risk in million DKK end of year in %
Highest risk of loss:  28.4  1.06%
Lowest risk of loss:    3.5  0.13%
Average risk of loss:    14.7  0.55%
The bank’s policy remains to hold the market risk at a low level.

Profit after tax
The result after tax was DKK 328 million for the year against DKK 286 million in the previous year.
The result after tax is equivalent to a return on equity of 14% after payment of dividend.

The balance sheet
The bank’s balance sheet total at the end of the year was DKK 17,682 million against last
year’s DKK 17,549 million. Deposits increased by 1% from DKK 12,755 million to DKK
12,867 million. The bank’s loans fell by 3% to DKK 12,424 million. The bank is continuing
to enjoy good underlying growth in new customers from its branch network and within
the niches Private Banking and wind turbine financing. The changed patterns of consump- tion with a higher proportion of saving and the general trend under which many custom- ers are reducing their balance sheets are, however, resulting in a greater rate of paying off existing loans than previously.

Liquidity
The bank’s liquidity is good, and the bank’s deposits are now DKK 443 million greater than its loans. The excess solvency relative to the statutory requirement is 186%. The bank’s short-term funding with a time to maturity of less than 12 months is only DKK
639 million, corresponding to DKK 4.6 billion in short-term money market placements primarily with the National Bank, Nordic banks and liquid securities. The bank is thus not dependent on the short-term money market.
Apart from this, a portion of the German loans portfolio for wind turbines is back to back, refinanced with the KfW Bank Group, so that the DKK 829 million in question can be ignored with respect to liquidity. The bank requires no financing in 2013 to comply with the minimum requirement of always being able to continue for up to 12 months without access to the financial markets.
The bank’s good liquidity is evident in the figure below, showing the liquidity buffer for
the next 36 months.

For the purpose of further diversifying the bank’s funding possibilities, an agreement
has just been entered into with BRFkredit on joint funding of the bank’s mortgage loans with security within 60% of the property’s value. The joint funding will take place in BRFkredit’s AAA-rated capital centre and it enables long-term hedging of the bank’s commitments. An agreement has also been entered into on the provision of mortgage loans for commercial properties. The two agreements will not result in any change to the bank’s existing mortgage credit agreements with Totalkredit/Nykredit and DLR Kredit.  

Rating
Ringkjøbing Landbobank was rated for the first time by the international credit rating bureau Moody’s Investors Service in May 2007. Since this beginning, the bank’s ratings have been:

Moody’s ratings:

 Financial Long-term 
 strenght liquidity Outlook
22 May 2007 C+ A1 Stable
End 2010 C+ A1 Negative
End 2011 C A3 Stable
End 2012 C - Baa1 Stable

The bank was downgraded one notch in 2012 on long-term creditworthiness. This was done in connection with a general reassessment of all ratings in Europe. Moody’s have had a general fear of the quality of credit in Denmark which also affected Ringkjøbing Landbobank. However, the effect on the bank was modest, as we currently have the best rating among Danish banks on Moody’s books.

The supervisory diamond
The Danish Financial Supervisory Authority has prepared a set of rules with key figures with which the bank must comply. The bank’s key figures and the FSA’s limit values are given in the table below. There must be compliance with the key figures as of the end of December 2012. Ringkjøbing Landbobank complies with all these values with a good margin.

 
The supervisory diamond
 

Limmit values The bank’s key figures
 
Stable funding < 1 0.7
Excess liquidity >  50 185.5
Large exposures < 125 27.2
Growth in loans <  20 -2.5
Exposure to the housing market <  25 12.2

Dividend and share buy-back programme
The bank’s board of directors will recommend payment of a dividend of DKK 14 per share for the 2012 financial year to the general meeting, equivalent to DKK 70 million. A dividend of DKK 13 was paid in 2011. A hundred thousand shares have also been bought up under the buy-back programme which was approved at last year’s general meeting. The recommendation to the general meeting will be that these be cancelled, thus reducing the number of shares in the bank from 4,940,000 to 4,840,000.
It will also be proposed for 2013 that a new buy-back program be established under which up to 130,000 shares can be bought for cancellation at a subsequent general meeting. At the current price, this authorisation will reduce the equity by about DKK
105 million.

Capital
The equity at the beginning of 2012 was DKK 2,483 million. To this must be added the profit for the period, less the dividend paid and the value of the own shares bought, after which the equity at the end of the year was DKK 2,676 million, an increase of 8%.
The bank’s solvency ratio (Tier 2) was calculated at 22.4% at the end of 2012. The
bank’s core capital percent (Tier 1) was calculated at 20.9%.

Solvency cover 
2012 
2011 
2010 
2009 
2008
Core capital ratio excl. hybrid core capital (%)  19.6  18.3  17.1  15.1  11.6
Core capital ratio (%)  20.9  19.8  18.6  16.6  13.0
Solvency ratio (%) 22.4 21.4 22.4 20.2 16.3
Individual solvency requirement (%)  8.0  8.0  8.0  8.0  8.0
Solvency cover 280% 268% 280% 253% 204%

Ringkjøbing Landbobank’s calculated individual capital adequacy requirement was cal culated at 6.7% under the bank’s robust business model and was reported at 8%.
From 2013, the method of calculation of the individual solvency will be changed to the so-called 8+ model, where the calculation takes its starting base at 8.0%. To this is added any supplements which are calculated inter alia for customers with financial
problems which exceed 2% of the bank’s capital base. This method of calculation does not take account of the bank’s earnings base and robust business model. The individual solvency under this method is expected to be calculated at 8.7%.
 

The bank’s shares
The bank’s share capital at the end of 2012 was DKK 24.7 million in 4,940,000 nom. DKK 5 shares.
The bank’s shares at the beginning of 2012 were listed on the NASDAQ OMX Copen- hagen at 579. The share price rose during 2012 to 770 at the end of the year and the price was 808 on 25 January 2013, making the current market value DKK 3.9 billion.

An investment in the bank’s shares at the beginning of 2001 has increased tenfold including dividend. This made an investment in the bank’s shares the best bank share investment in Denmark in this period.

Increase in customers
We intensified our efforts to gain new customers and business in 2012. This was done on the basis that we have both the liquidity and the capital to support growth, we felt comfortable with the bank’s credit book, and we have a cost structure suitable for the future. The greatest challenge in a time of low growth is thus to create growth in the bank’s top line.
The bank’s recruitment activities will continue in 2013, where initiatives will include further investment in expanding the bank’s Private Banking platform and the market share in the branch network.
We are currently experiencing a very positive growth in customer numbers in the branch network within the Private Banking segment, with transfers of deposits, pension and securi- ties customers. On the loans side, growth to date has been swallowed by the paying down of balance sheets. However, our assessment is that we are also currently extending the founda- tion for future earnings.

Changes to the articles of association and the board of directors
For several years, the bank’s board of directors has been evaluating the management’s and the board of directors’ expertise and working relationship, and there is a good basis for the chosen business model. The FSA also decided for group I and II banks in
2012 that the board of directors must include a member who has relevant experience managing a bank. The shareholders’ committee decided on this basis to recommend a change in the bank’s articles of association such that the committee can elect members directly to the board of directors.The committee will now elect former bank manager Jørgen Lund, age 63, of Skanderborg, who has just retired from Jyske Bank. Mr Lund will replace Keld Hansen, grocer, of Søndervig, who is resigning at the general meeting after
11 years on the board.

Expected result in 2013
The bank’s core earnings in 2012 were DKK 401 million, which is above the range given at the beginning of the year.
Ringkjøbing Landbobank’s market share is about 50% in that part of West Jutland where the bank’s old branches are located. The bank also has well-established branches in Herning, Holstebro and Viborg which are continuing to operate positively. The bank’s plan is to retain and develop this portion of the customer portfolio with good and competitive products and with focus on the employees’ expertise and work in advis-
ing customers of the options in a changing financial world. In 2013, the bank expects
a continuing positive inflow of customers to its branches in central and western Jutland
because of its long-term outreach sales and consolidation in the sector.
The activities in the bank’s Distance Customer Department and its niche concepts, including the Holte branch, are expected to develop positively as a whole in the coming year. Focus will be placed on serving the bank’s current customers and further devel- oping the portfolio within wind turbine financing, medical practitioners and affluent customers.
Core earnings in 2013 are expected to be in the range DKK 350 - 425 million. To this must be added the result for the bank’s trading portfolio.

Events after the end of the financial year
There have been no events after the balance sheet date and to date which would change the assessment of the bank’s 2012 annual report.
 

Capital structure
The bank’s management has specified a general objective for the bank’s capital. The objective is that the bank must have a solidly based capital structure in comparison with both equivalent and bigger banks.
The objective is also that the bank must have adequate capital for future growth, and there must also be adequate capital to cover any on-going fluctuations in the risks which the bank has assumed.
The bank’s capital ratios as of the end of December 2012 were as follows:

Capital ratios

•   Core capital ratio excl. hybrid core capital    19.6%
•  Core capital ratio          20.9%
•  Solvency ratio          22.4%
With respect to the calculation of the bank’s Tier 1 capital, capital base and core capital ratio excluding hybrid Tier 1 capital, core capital ratio and capital adequacy ratio at the end of 2011, reference is made to the calculation of solvency requirement on page 49.

The above capitalisation makes Ringkjøbing Landbobank one of Denmark’s best capi- talised banks. The bank’s objective is to retain this ranking in 2012. In the bank’s assess- ment, this can be done on the basis of the expected result for 2012.
The bank’s board of directors will recommend to the general meeting that a dividend
of DKK 14 per share, equivalent to DKK 70 million, be paid for the 2012 financial year. A dividend of DKK 13 was paid in 2011. Ninety thousand shares to a value of DKK 66 million were also bought during 2012. A further 10,000 were also transferred in Janu- ary 2013. Cancellation of 100,000 shares will be recommended to the general meet- ing, such that the number of shares in the bank will be reduced from 4,940,000 to
4,840,000.
A proposal will also be made that a new buy-back programme be established for 2013 under which up to 130,000 shares can be bought for cancellation at a future general meeting. At the current price, this authorisation will reduce the share capital by DKK
105 million kroner.
The maturity structure of the bank’s external subordinated debt is presented in the fol- lowing overview.

Subordinate capital – maturity structure

Subordinated loan capital
•  Nom. EUR 27 million taken up on 30 June 2008, term 13 years to 30 June 2021, option of early redemption from 30 June 2018 if approved by the Danish Financial Supervisory Authority.

Hybrid core capital
•  Nom. DKK 200 million taken up on 2 March 2005, indefinite term, option of early
redemption from 2 March 2015 if approved by the Danish FSA.
•  Of which nom. DKK 28 million bought in the fourth quarter of 2012.
 

The bank uses the capital adequacy rules implemented in 2007 for the calculation and stating of weighted items with credit and counterparty risks and market and operational risks.
Reference is made to the following summary for further information on the methods used by the bank for the various types of risk.

Calculation of capital adequacy – methods used
The bank uses the following methods for the calculation of capital adequacy:
•  Credit risk outside the trading portfolio  Standardised Approach
•  Counterparty risk  Mark-to-Market Method
•  Credit risk reducing method - financial collaterals  Comprehensive Method
•  Market risk  Standardised Approach
•  Operational risk  Basic Indicator Method

As will be evident from the above, the bank uses the standard method for calculation
of its credit risk and therewith the risk-weighted items. This method uses fixed solvency weightings. As a result of this method, the bank has not had the same lowering of sol- vency weighting as those banks which are using more advanced methods. On the other hand, the bank does not experience increasing solvency weightings in periods of reces- sion. Relative to the advanced methods, use of the standard method means that there
is significantly greater robustness in the calculated capital percentages and a smaller
volatility in the risk-weighted items.
The transfer to the new Basel III rules is therefore not expected to have a significant ef- fect on the bank’s risk-weighted assets, and as the bank’s capital base is adequate, the bank is prepared for the transfer to the new rules on capital.
Ringkjøbing Landbobank also focuses on its internally calculated individual solvency requirement, defined as an adequate capital base as a percentage of the bank’s risk- weighted items. The adequate capital base is assessed on the basis of an internal model and calculated as the amount which is appropriate to cover the bank’s current and future risks.
The individual solvency requirement is calculated at 6.7%, which reflects the bank’s solid earnings, low credit risk and modest market risk. The computed adequate capital base is reassessed on a regular basis, and reports to the Danish FSA are also made on a regular basis. The reporting of the individual solvency requirement to the FSA is given as
8% as the individual solvency requirement calculated by the bank at less than 8% can- not be less than 8% under Section 124(4) of the act on financial activities. The FSA most recently reviewed the bank’s calculation of its individual solvency requirement in spring
2012. For further information on the calculation of the individual solvency requirement of Ringkjøbing Landbobank, please see the bank’s website at: www.landbobanken.dk.
 

Although there is a minimum solvency requirement of 8% which the bank must use as its individual requirement, the bank has a considerable excess solvency as indicated in the following summary.

Solvency cover 
 2012 2011 2010 2009 2008
Solvency ratio (%)  22.4  21.4  22.4  20.2  16.3
Individual solvency  requirement (%)    8.0  8.0  8.0  8.0  8.0
Excess solvency (%)  14.4  13.4  14.4  12.2  8.3
Solvency cover 280% 268% 280% 253% 204%

It can be concluded that throughout 2012, Ringkjøbing Landbobank has complied with both external and internal capital requirements, and the actual capital base has continu- ally been considerably above the adequate level.
From 2013, the method of calculating the individual solvency will be changed to the
so-called 8+ model, where the calculation is based on 8.0% of the bank’s risk-weighted items. This 8% covers the most common risks, plus any weighting for risks and cir- cumstances which are not reflected in the calculation of the risk-weighted items, in the assessment of which the bank takes account inter alia of the following:
•   Credit risks on major customers with financial problems
•   Concentration risks in the loans book
•   Market risks
•   Liquidity risks
•   Operational risks

Unlike the method of calculation used to date, the 8+ model does not take account of the bank’s strong earnings base and robust business model. The changed method will therefore result in an increase in the individual solvency requirements from 6.7% to
8.7%.

Risks and risk management
Ringkjøbing Landbobank is exposed to various types of risk in connection with its opera- tions: credit risk, market risk, liquidity risk and operational risk.
The credit risk is defined as the risk that payments owing to the bank are not judged to be recoverable because of lack of either ability or willingness to make payment at the agreed time.
The market risk is defined as the risk that the market value of the bank’s assets and liabilities will change as a result of changes in market conditions. The bank’s total market risk includes interest rate risks, foreign currency risks, share risks and property risks.
The liquidity risk is defined as the risk that the bank’s obligations to make payments
cannot be honoured under the bank’s cash flow position.
Finally, the operational risk is defined as the risk of either direct or indirect financial loss- es as a result of faults in internal processes and systems, human error or external events.

Policy for risk taking and management
The framework for the bank’s risk taking is specified by the board of directors, which
has adopted a policy for each individual risk area, which inter alia defines the bank’s risk profile in the area. Each policy is reviewed and reassessed by the board at least once a year in connection with the board’s position on the bank’s general business model and risk profile.
The bank’s general principle for assuming a risk is that the bank will only assume risks
within a moderate risk profile which the bank has the expertise to manage.
The basis for the board of directors’ review of the bank’s business model and associated policies for each individual risk area is a general risk report prepared by the bank’s risk manager. The report covers the various risks to which the bank is exposed, and gives the board a complete picture of the bank’s general risk profile. In comparison with the
market possibilities, the board than assesses whether the bank’s business model and risk profile should be adjusted. The report also acts as a basis for any adaptation of the poli- cies in the various risk areas.
Apart from the strategic risk management, there is an on-going operational central management and monitoring of the bank’s risks in each area. This monitoring is re- ported to the bank’s management and board of directors. The management and control and reporting functions are separate, and the work is performed by several of the bank’s central staff functions. The bank’s risk manager ensures full reporting of risks and pro- vides a meaningful picture of the bank’s actual risk taking.
The various types of risk are subsequently described in more detail.
 

Credit risks - loans
Over the years, Ringkjøbing Landbobank has developed to its present status as primarily a regional bank in central and western Jutland and a niche bank within selected areas.
This development has been a part of the bank’s strategy, and the bank’s management notes with satisfaction that the bank has achieved a significant diversified portfolio of loans, including a wide geographic distribution of branches.
In general, Ringkjøbing Landbobank assumes credit risks on the basis of a policy, the objectives of which are to have a well-balanced relationship between assumed risks and the return gained by the bank, that the bank’s losses must be at an acceptable level rela- tive to the Danish financial sector, and finally, losses suffered even in extreme situations must be able to be accommodated within the bank’s results.
The gearing of loans relative to the bank’s subordinated capital is about 4.5, and the bank’s objective is that the results must be achieved with a lesser or the same credit gearing as that of the country’s major banks.
Historically, the bank has always had a healthy and conservative credit policy, and focus will remain on ensuring an efficient management and monitoring of the bank’s total portfolio of loans via its central credit department.
Apart from the normal following up and management of credit in the bank’s central credit department, where there is regular reviewing of and following up on all major commitments, the bank has developed a set of credit evaluation models which are used to assess the quality of the exposure to credit. Statistical models are used for private and small business customers, while an expert model is used for major businesses. The sta- tistical model has 7-10 different factors, including information on the customer’s assets and a quantity of behavioural data. The expert model for business customers is based
on information on the customer’s creditworthiness and earning capacity.
Using these models, the bank’s judgment is that the credit quality for those loans which have not been written down is generally unchanged relative to 2011. As in previ-
ous years, the bank is, however, aware of the risks which the economic conditions are imposing on the bank’s customers. A particular problem is the challenge posed to the bank’s private customers by a weak property market and potentially rising interest rates. The bank’s customers are, however, judged to be relatively less vulnerable to these chal- lenges, among other reasons because of a relatively low home loan burden in the bank’s core area.
 

Actual net losses
In DKK 1,000 Loans with Write-downs

Year 
Actual net losses Actual net losses after interest suspended calculation of interest on loans and provisions for guarantees 
Total loans and guarantees etc. Percentage loss before interest *) Percentage loss after interest *)
1988  -14,205  -5,205  4,522  93,900   1,408,830   -1.01%  -0.37%
1989  -18,302  -5,302  13,107  117,270   1,468,206   -1.25%  -0.36%
1990  -15,867  -1,867  47,182  147,800   1,555,647   -1.02%  -0.12%
1991  -11,429  3,571  47,626  170,000   1,805,506   -0.63%  0.20%
1992 -32,928 -14,928 43,325 177,900 1,933,081 -1.70% -0.77%
1993  -27,875  -6,875  30,964  208,700   1,893,098   -1.47%  -0.36%
1994  -14,554  4,446  33,889  223,500   1,938,572   -0.75%  0.23%
1995  -10,806  10,194  27,292  238,800   2,058,561   -0.52%  0.50%
1996  -19,802  -1,802  18,404  233,400   2,588,028   -0.77%  -0.07%
1997  -31,412  -12,412  39,846  236,600   3,261,429   -0.96%  -0.38%
1998  -2,914  18,086  4,905  263,600   3,752,602   -0.08%  0.48%
1999 -442 21,558 18,595 290,450 5,148,190 -0.01%  0.42%
2000 -405 27,595 12,843 316,750 5,377,749 -0.01% 0.51%
2001  -8,038  20,962  14,222  331,950   6,113,523   -0.13%  0.34%
2002  -8,470  20,530  26,290  382,850   7,655,112   -0.11%  0.27%
2003  -22,741  2,259  23,412  394,850   8,497,124   -0.27%  0.03%
2004  -14,554  9,446  18,875  404,855   11,523,143   -0.13%  0.08%
2005  -22,908  192  35,796  357,000   15,522,264   -0.15%  0.00%
2006  -13,531  7,028  20,578  295,000   17,858,787   -0.08%  0.04%
2007  -15,264  4,888  13,190  289,097   19,227,573   -0.08%  0.03%
2008  -34,789  -10,237  22,110  356,083   16,475,975   -0.21%  -0.06%
2009  -73,767  -47,658  62,649  467,025  14,890,027  -0.50%  -0.32%
2010  -69,428  -40,207  66,237  565,035  14,758,234  -0.47%  -0.27%
2011  -78,813  -43,073  61,419  649,856  14,448,638  -0.55%  -0.30%
2012  -90,022  -48,337  113,312  758,363  14,849,702  -0.61%  -0.33%
25-year average (1988 - 2012) -0.54% -0.02%
10-year average (2003 - 2012) -0.30% -0.11%
*) Actual net losses relative to total loans, guarantees, write-downs on loans and provisions for guarantees.  
Explanation: The percentage losses were computed as the actual net losses for the year before and after interest on the written-down part of
loans as a percentage of total loans, guarantees and write-downs on loans and provisions for guarantees. A minus sign before a percentage
loss indicates a loss, while a positive percentage loss means that the interest on the written-down part of loans was greater than the actual net
losses for the year. All the above figures are exclusive amounts regarding the national bank package I etc.

The above table documents the bank’s healthy credit policy. As will be evident, the bank’s average percentage loss after interest over the last 25 years (1988 - 2012) was
-0.02%, with -0.77% (1992) the highest loss and +0.51% (2000) the most positive
figure. The average percentage loss before interest over the last 25 years is -0.54%, with
-1.70 percent (1992) the highest loss and -0.01% (1999 and 2000) the lowest loss. The average percentage loss after interest over the last ten years (2003 - 2012) was -0.11%; the average percentage loss before interest was -0.30%.
The regional section of the bank is run partly via branches in the bank’s original core area in West Jutland and partly via branches in the three big central and western Jutland cities Herning, Holstebro and Viborg.
The most important niches within the bank’s niche section are financing of medical practitioners’ purchases of private practices, a Private Banking department covering affluent private customers, and financing of securities and loans for the financing of wind turbines. The financing of wind turbines is for Danish investors’ purchases of wind turbines erected in Denmark, Germany and France.
An important common factor in the niche areas is that the bank attempts to obtain a first mortgage, and therewith satisfactory security in the mortgaged assets, which is an important part of the bank’s business philosophy.
 

Concentration of credit
As indicated in the summary below, total large exposures amount to 27.2%. This figure includes a good quality commitment of 10.4% with adequate security and a commit- ment with a well-consolidated financial counterparty which will be redeemed in 2013.

Concentration of credit 
 2012 2011 2010 2009 2008
Total large exposures  27.2%  11.8%  0.0%  0.0%  12.1%
Explanation: The Danish Financial Supervisory Authority key figure »Total large exposures«.

Explanation: Distribution of the bank’s loans and guarantee portfolio before write-downs and provisions by customer addresses.

Geographic spread of the bank’s loans and guarantee portfolio
As is evident from the figure, a significant geographic diversification of the bank’s port- folio of loans and guarantees has been achieved via both the regional section and the niche section.
The loans via the bank’s niche section have also helped to ensure a major diversification in the bank’s loans portfolio, so that this portfolio is not correlated with the economic cycle to the same extent as if the bank were run exclusively as a regional bank.
 

Credit risk on financial counterparties
Exposure to financial counterparties, and therewith a credit risk, including a settlement risk, arises in connection with the bank’s trading in securities, foreign currency and de- rivative financial instruments, the bank’s loans to other banks, and the bank’s possession of bonds and transfer of funds. The settlement risk is the risk that in connection with the settlement of trades in securities and/or currency, the bank will not receive payment or securities corresponding to the securities and/or payments which the bank had made and delivered.
The bank’s board of directors grants lines of credit for credit risks and the risk of wind- ing up against financial counterparties. When granting lines of credit, account is taken of the individual counterparty’s risk profile, rating, size and financial circumstances, and there is constant follow-up on the lines of credit which were granted.
The bank’s policy is to keep the credit risk on financial counterparties at a balanced level
relative to the bank’s size, and against credit institutions with good creditworthiness.

Claims on central banks and credit institutions
One of the two major items concerning the credit risk with financial counterparties is credit bal- ances with central banks and credit institutions. The bank has assumed only a moderate risk on this item, and in the total credit balances with central banks and credit institutions, only 72% is thus due within three months.

The bond portfolio
The second of the two major items concerning the credit risk with financial counterparties
is the bank’s bond portfolio.

Bonds distributed by rating classes

A1/A+
10%  A2/A
3%

 

 

Aaa/AAA
41%
 
A3/A-
22%

 

Baa1/BBB+
7%

Baa2/BBB
4%
 

 
Ikke rated
11%
 
Ba1/BB+
1%
 
Baa3/BBB-
1%
 

Explanation: The bond portfolio distributed by rating classes. Ratings from the credit rating bureaus Moody’s Investors Service, Standard & Poor’s and Fitch were used in the specification.
 

As will be evident in the figure below, the bond portfolio consists mainly of AAA-rated Danish mortgage credit bonds and bank bonds. There is also a modest holding of com- mercial bonds. The portfolio of bank bonds consists chiefly of bonds with short terms issued by rated Nordic banks. These bonds have a good credit quality, but their market value can vary over time in connection with general changes in credit spread in the market, and company-specific circumstances can also affect the value of these bonds. The credit spreads on these bonds were reduced throughout 2012, resulting in a capital
gain for the bank. On the other hand, a later extension of the spreads could trigger a loss. Given the relatively short term, the risk involved is, however, manageable.
The bank’s bond portfolio does not involve any exposure to southern European countries.

Market risks
The bank’s basic policy with respect to market risks is that the bank wishes to keep such risks at a relatively low level.
The bank has determined a concrete framework for each type of market risk, and the risk assessment includes the objective that there must be a sensible and balanced rela- tionship between risk and return.
The bank uses derivatives to cover and manage the various market risk types to the extent to which the bank wishes to reduce the extent of, or eliminate, the market risks which the bank has assumed.
To supplement the more traditional measures of market risk, the bank has a mathemati- cal/statistical model to compute market risks. The model is used to compute Value at Risk (VaR), which is regularly reported to the bank’s management.
VaR is a measure of risk which describes the bank’s risk under normal market conditions. An isolated VaR is calculated for interest rate, foreign exchange and listed share posi-
tions, and a total VaR is also calculated for all of the bank’s market risks consisting of
interest rate, foreign exchange and listed share positions. This possibility of calculating a total VaR for the bank’s market risks is one of the major advantages of the VaR model compared with more traditional measures of risk. The reader is referred to the following section “Value at Risk” for the specific results etc. under the VaR model.
 

Interest rate risk
The bank’s loan and deposit business and accounts with credit institutions are mostly entered into on a variable basis. The bank’s fixed interest financial assets and liabilities are monitored continuously, and hedging transactions are entered into as needed with a consequent reduction of the interest rate risk.
Ringkjøbing Landbobank’s policy is to maintain a low interest rate risk, and the bank thus does not assume high levels of exposure to movements in interest rates.
The bank’s interest rate risk is monitored and managed daily by the bank’s securities department, and the bank’s service and support department controls maintenance of the limits for assumption of interest rate risk, and reports to the bank’s board of direc- tors and management.

Interest rate risk

6

5

4

3

2

1

0

 

Explanation: The interest rate risk shows the effect on the result as a percentage of the core capital after deductions of one percentage point change in the interest level.

As will be evident from the figure, the bank has maintained a low interest risk over the
last five years in accordance with the bank’s policy for this type of risk
Foreign exchange risk
The bank’s principal currency is the Danish krone, but the bank has also entered into loan and deposit arrangements in other currencies.
The bank’s policy is to maintain a minimal foreign exchange risk, and the bank thus reduces on-going positions in foreign currencies via hedging.
The bank’s positions in foreign exchange are managed daily by the foreign department, while the bank’s service and support department monitors maintenance of lines of
credit and reports to the board of directors and management.
As in previous years, the bank’s foreign exchange risk in 2012 was at an insignificant
level.
 

Share risk
The bank is co-owner of various industrial companies via equity interests in DLR Kredit A/S, PRAS A/S, BankInvest Holding A/S, SparInvest Holding A/S, EgnsInvest Holding A/S, Letpension Holding A/S, Nets Holding A/S, Swift, Bluegarden A/S, Værdipapircentralen A/S, Bankernes Kontantservice A/S, Landbrugets Finansieringsbank A/S and Bankdata.
These holdings are comparable with the wholly owned subsidiaries of major banks, and the equity interests are thus not deemed to be a part of the bank’s share risk. The bank also holds a small portfolio of listed shares.
The bank’s policy is to maintain a low share risk. The daily management of the bank’s share portfolio is undertaken by the securities department, while monitoring of the lines of credit and reporting to management and the board of directors are performed by the service and support department.
The bank’s portfolio of listed shares etc. amounted to DKK 29 million at the end of 2012 against DKK 12 million at the end of 2011. The portfolio of sector and capital shares at the end of 2012 was DKK 201 million against DKK 237 million at the end of 2011.
As will be evident from the figure below, the bank’s exposure to shares (excluding sector and capital shares) as a percentage of the bank’s equity has been modest, therewith documenting the bank’s goal of maintaining a low risk on shares.

Share exposure

8

7

6

5

4

3

2

1

0

 

Explanation: The share exposure is computed as the bank’s holding of shares (excluding sector shares and other holdings) as a percentage of the shareholders’ equity.
 

Property risk
The bank primarily wishes to possess only properties for use in banking operations, and also to maintain minimal property risks.
The bank’s portfolio of both domicile and investment properties is thus quite modest relative to the bank’s balance sheet total.

Value at Risk
The bank’s total Value at Risk at the end of 2012 was DKK 5.8 million. This sum is an expression of the maximum loss in a statistical perspective which the bank could risk losing with 99% probability if all market positions were retained unchanged for a period of 10 days.

 
VaR summary
In DKK million
 

 

Average Min. Max. End of year
 
Risk VaR figure VaR figure* VaR figure* VaR figur
Interest 15.0 3.1 28.9 5.7
Foreign currency 0.3 0.1 0.2 0.1
Share 2.7 2.6 2.4 2.2
Diversification  -3.3  -2.3   -3.1  -2.2
Total VaR figure 14.7 3.5 28.4 5.8

* Determined by the total VaR figure

As indicated in the table, the bank’s total VaR throughout 2012 varied from DKK 3.5 million to DKK 28.4 million. The average VaR figure has been DKK 14.7 million, a small increase relative to last year.
Reference is made to note 41 on page 74 for the VaR figures for the years 2008 - 2012.

The model in brief
The model is a parametric VaR model based on a historical analysis of the covariation (correlations) between the prices of various financial assets etc., including different share indices, various official interest rates and interest swap rates, and different exchange
rate indices. By combining the historical knowledge of the covariation for the financial markets with the bank’s current positions, the model can calculate a risk of losses for a forthcoming ten-day period. All of the bank’s interest rate positions, foreign currency positions and listed share positions etc. are included in the calculation, while positions in sector shares and unlisted ownership interests are not included. The model does not take account of credit spread risks on the bank’s bond portfolio. The model is unchanged relative to last year.
 

Back tests and stress tests
So-called “back tests” are made to document that the VaR model provides a sensible picture of the bank’s risk. The test compares the calculated loss under the model with the losses which the bank would actually have suffered if the positions in question had been retained for a ten-day period. A number of stress tests are also carried out to indi- cate the bank’s risk of loss in abnormal market situations. Back tests of the model were performed throughout the year with satisfactory results.

Liquidity risk
In general with respect to the bank’s liquidity management, it is the bank’s objective not to have uncovered net funding requirements and not to be dependent on the short- term money market. An objective is thus that the bank may not be affected by a total shutdown of the money market for a period of 12 months.
The bank’s loans portfolio is funded primarily via a range of sources, namely the bank’s deposits, by taking out long-term loans with other credit institutions, via issuing bonds, and finally via the subordinated capital taken up by the bank, and the bank’s equity.
The bank’s deposit base consists primarily of core deposits and deposits from customers with a long-term relationship with the bank.
Ringkjøbing Landbobank has also entered into longer-term bilateral loan agreements with European banks. It should, however, be noted that the bank’s funding situation is not comprised such that the bank is dependent on the institutions in a single country or on single institutions.
The bank entered into an agreement with BRFkredit during 2012 on joint funding. This agreement means that the bank can procure liquidity by letting BRFkredit issue SDO bonds against security in the loans which the bank has provided to customers with secu- rity in real estate. The bank has not yet availed itself of this setup, but the bank expects that the option can act as a supplementary source of funding for the bank in the longer term.
 

 

 

Deposits and other debts
 
Distribution of funding
 

73%

 

 

 

 

 

 

Other liabilities
 

 

 

1%
5%
17% 2%
 
Issued bonds - term to maturity over 1 year
1%

Issued bonds - term to maturity under 1 year
1%

Debt to credit institutions - term to maturity over 1 year
 

Total capital base
 

Debt to credit institutions - term to maturity under 1 year
 

 

DKK 1,000
 
The short-term funding (term to maturity under 1 year):
Issued bonds - term to maturity under 1 year 224,583
Debt to credit institutions and central banks - term to maturity under 1 year 414,472
Total 639,055
Is covered as follows:
Cash in hand etc. 36,776
  Deposits on demand with central banks - certificates of deposit  622,414
 Claims on credit institutions - term to maturity under 1 year 92,578
 Listed bonds and listed shares etc. at current value 3,812,362
 Total 4,564,130
 Excess cover 3,925,075

As will be evident from the above, the short-term funding (time to maturity less than one year) is supported via the bank’s portfolio of certificates of deposit and demand de- posits with the Danish National Bank, short-term loan arrangements with other banks, and the bank’s portfolio of liquid securities. It should be noted that the excess liquidity cover at the end of 2012 was DKK 3.9 billion, while the corresponding figures at the end of 2011 and 2010 were DKK 3.7 billion and DKK 3.3 billion respectively.
To ensure diversification in funding, the bank established an EMTN bond programme of
EUR 2 billion in 2008. The programme helps to ensure alternative funding sources for the bank. The bank has made issues under the programme in 2010 and 2011, but has not done so in 2012.
 

Operational risk
The capital adequacy rules require the banks to quantify and include an amount for operational risks when computing their capital adequacy.
The bank uses the so-called basic indicator method where, on the basis of calculation of an average of the most recent three financial years’ net incomes, a sum is quantified and ascribed to the risk-weighted items to cover the bank’s operational risks.
The bank regularly produces reports on the losses and events which are judged to be attributable to operational risks. An assessment is made on the basis of the reports of whether procedures etc. can be adjusted and improved in order to avoid or minimise any operational risks, and the bank’s procedures are also regularly reviewed and as- sessed by the bank’s internal and external auditors.
An important area in assessment of the bank’s operational risks is IT.
The bank’s IT organisation and management are always concerned about IT security, including preparation of IT emergency plans, in connection with which the bank speci- fies requirements and levels for availability and stability of the IT systems and data used by the bank. These requirements apply to both the bank’s internal IT organisation and its external IT supplier Bankdata, which the bank owns together with a number of other banks.

Further information of the bank’s risks
With the implementation of the Basel II rules in Danish legislation on capital adequacy, Danish banks were also required to publish certain information on risks (popularly also called Column 3 information). Some of the required risk information is given in this an- nual report, but for a full overview of the bank’s duty to provide information, the reader is referred to the bank’s website at www.landbobanken.dk.
 

Corporate governance
Corporate governance in Ringkjøbing Landbobank concerns the objectives which gov- ern the bank's management and the general principles and structures governing the interplay with the bank’s primary interested parties: the bank’s shareholders and cus- tomers, the bank’s management and employees, and the local areas in which the bank has branches.
Since 2002, the bank’s management has taken an active approach to the recommenda- tions issued on corporate governance, and the bank’s attitude to corporate governance has been minuted in the annual reports since that year. When preparing the 2012 annu- al report, the bank’s board of directors and management assessed the bank’s positions on the individual recommendations. The bank’s management supports the efforts in the area of corporate governance, and the bank’s management and board of directors have elected to adopt almost all of the recommendations in this area. In individual areas, the bank’s management has, however, elected either not to follow the recommendations or to follow them only in part. The bank currently follows 74 of the 79 recommendations. Please note in this respect that election periods and procedures for the periods served
by members of the shareholders’ committee and the board of directors are considered appropriate. The board of directors does, however, believe that the procedure for elec- tion to the board can usefully be changed so that candidates can be found both among and beyond the membership of the shareholders’ committee. This point is expected to be put to the general meeting for approval. The detailed statement concerning corpo- rate management required in the management report under current accounting rules is published on the bank’s website.
See www.landbobanken.dk/god-selskabsledelse. The statement in question also indi- cates the bank’s management’s position on the supplementary recommendations on good corporate governance etc. issued by the Danish Bankers’ Association.
For information on the board members’ other managerial activities, see pages 85 and
86.
 

Statutory statement on social responsibility
Throughout its long history, Ringkjøbing Landbobank has always been strongly an- chored in the local communities in which the bank is represented, and the bank has considered it an entirely natural part of its business basis to support the local area’s development. Via the management’s implementation of and position on the recommen- dations on good corporate governance, the bank is also focused on those matters which govern the interaction with the bank’s primary stakeholders, namely its shareholders
and customers, its management and employees, and the local areas in which the bank’s branches are situated. The bank’s policy in the area of social responsibility is based on a desire to run a responsible and value-creating bank which works consciously to create the best results for shareholders, customers, employees, the local community and the
surrounding environment and the bank as a financial institution. The bank’s policy in the area of social responsibility is given on its website, www.landbobanken.dk/samfundsan- svar.
Some of the bank’s activities in 2012 for its main stakeholders are described below.

Customers
During the year, the bank continued its work on development of its advisory service for customers. This includes:
•   Further development of the bank’s concept within the area of advice on pensions, where the bank’s advisers give the customer a general view of pension saving schemes and cover in the event of invalidity and death. The bank has a concept which, in a simple and clear way, gives the customer a sound understanding in a highly complex area, and where the customer is then in a position to make some decisions which are especially critical for his or her financial situation. On the basis of this concept, the bank is systematically proceeding to contact those customers who could have a need for advice in this area.
•   Implementation of the concept of all-inclusive advice where, in cooperation with the customer, the bank prepares a review of the customer’s total financial situation, including loans, insurances, pension etc.
•   Development of means of communication between the bank and its customers, in- cluding development of easily understandable elements on the bank’s website which give the customer a solid insight into some of the bank’s products. The banks Mobile Bank offer is also being extended to include iPad.
•   The strength of Private Banking advice, where the bank’s asset advisers provide spe-
cialised advice to customers with complex financial situations.
 

Employees
The bank initiated the following in 2012 in relation to employees:
•   Signing a new collective agreement with the possibility of flexible arrangements.
•   Held employee development interviews with all employees.
•   Certification of advisers in financial products to ensure their provision of competent
advice.
•   Training of all advisers in advising on pensions.
•   In-service training for a large number of employees in provision of all-round advice.
•   Appointment of a total of 15 employees, including two new trainees in 2012 and seven new trainees in 2013. Apart from appointing the new trainees, the bank held a career day to give secondary school students a basis for making a rational career choice.
•   Implementation of new routines and systems to increase the efficiency of the bank’s administrative processes. This also includes continuation of the campaign “Overview means profit”, which ensures employees a better overview of their own duties. In the bank’s experience, this ensures happier employees, less stress and better provision of advice to the bank’s customers.
•   Supported social activities in the bank, including financial support for the bank’s staff
association.

The environment
As a bank and a workplace, the bank accepts shared responsibility for the environment. In 2012 this included:
•   New loans of about DKK 400 million for wind turbine financing and major solar cell
systems.
•   Development of a concept for financing solar cell systems for private homes.
•   Financing of energy-saving initiatives.
•   Established a partnership with interactive web portal to help the bank’s customers to
identify energy-saving initiatives in their homes.
As a workplace, the environmental initiatives included:
•   Focus on conversion of procedures to electronic case handling. This will reduce the
bank’s environmental impact on an on-going basis.
•   Replacement of air conditioning system in the bank’s head office.
•   Holding of video meetings with Bankdata to the greatest possible extent to reduce
driving to Bankdatas headquater in Fredericia.
•   Planning of training and meeting activities and coordination to reduce the associated
travel as much as possible.
 

Local community
Given its position in the local area, the bank has a natural wish to support the area’s development. Activities in 2012 included the following:
•   Total payment of DKK 151 million in corporation tax and wages, of which DKK 138
million was corporation tax.
•   Allocation of a total of about DKK 1 million from the following funds:
•   Sdr. Lem Andelskasses Fond
•   Tarm Banks Jubilæumsfond
•   Bankens Resultatfond
•   Sponsorship agreements with more than 700 clubs and associations in the bank’s lo- cal area. This includes subsidies for cultural activities, general and elite sports in order to support the goal of putting the local community on the map. Major activities dur- ing the year included support for:
•   Biopartner - Ringkøbing cinema
•   Artificial grass pitch for SG-Skjern
•   Generator - music venue in Ringkøbing
•   New swimming facility in Ringkøbing
•   and many more

The bank’s website - www.landbobanken.dk/samfundsansvar - provides a detailed ac- count of the bank’s social responsibility.
 

Statutory statement on management
The board of directors and the shareholders’ committee
The bank’s shareholders’ committee has 25 members elected for four years at a time. The bank’s board of directors has eight members - six elected by shareholders and two elected by employees. The bank’s management does not sit on the board, but takes
part in board meetings. The board holds 10 - 12 meetings a year. The board of directors is elected by the bank’s shareholders’ committee and is comprised in a manner which ensures a broad range of expertise and compliance with a special expertise profile speci- fied by the board. Board members are elected for four-year terms. In accordance with the recommendation of the committee on good corporate governance, at least half the board members must be independent.
Members of the board of directors and members of the shareholders’ committee must retire from the shareholders’ committee at the latest at the first annual general meeting after they have reached the age of 67.

Committee of the board of directors
The bank’s board of directors has appointed an audit committee to monitor and check accounting and auditing matters and prepare the board’s processing of matters related to accounting and auditing. The committee consists of the bank’s full board of directors.
The board has also appointed an independent board member (the chairman of the au- diting committee) who possesses the requisite qualifications within accounting, includ- ing the process of presenting the financial statements, internal controls and risk man- agement etc. Other committees, including the remuneration committee, also comprise the full board of directors.

Presentation of the financial statements
The board of directors, management and the audit committee regularly ensure that the bank’s control and risk management are functioning satisfactorily in connection with the process of presentation of the financial statements. The object is to ensure reasonable, but not absolute, assurance that unlawful use of assets, losses and/or material errors and omissions are avoided in connection with the presentation of the financial statements. Management regularly monitors compliance with relevant legislation, other regula-
tions and provisions in connection with the presentation of the financial statements and
reports regularly to the board of directors.

Evaluation etc.
The board of directors made a comprehensive self-evaluation during 2012. As a basis for the evaluation, the board first identified the expertise which it should possess in order to be able to perform its activities in a competent way. This was done on the basis of the bank’s business model and a comprehensive analysis of the risks associated therewith.
The general expertise required includes a knowledge of the following matters:
•  Credit
•  Market risk
•  Liquidity
•  Operations
•  Accounting and capital
•  Statutory framework for financial activities
 

Each individual board member assessed his or her own qualifications on the basis of the specified requirements. The result was discussed by the board, and its assessment was that as a whole, it possesses all the required expertise and qualifications.
In July 2012, the FSA issued new guidelines on the work of the board of directors etc. An expectation was expressed to the effect that for banks in groups I and II, there should be at least one board member with relevant experience in managing a bank. Ringkjøbing Landbobank’s current board of directors has extensive managerial experi-
ence and insight, but none of its members has the formal qualifications as prescribed by
the FSA.

Proposed change to the board of directors
Although the current board of directors is fully qualified with respect to its duties, it is very much wished that in future, the board can comply with the expectation of at least one member with managerial experience in the financial sector. Board member Keld Hansen has advised that he wishes to retire in connection with the next general meeting and election of the board of directors. The board wishes that the vacancy be filled by a member with managerial experience in the financial sector.
The bank has accordingly had some discussions with Jørgen Lund, age 63, who, after a long career in a number of managerial posts in Jyske Bank, elected to retire from his permanent position with the latter bank. Mr Lund has declared his willingness to accept a position on the board of directors of Ringkjøbing Landbobank. Mr Lund will replace Keld Hansen, grocer, of Søndervig, who is retiring at the next general meeting after 11 years on the bank’s board of directors.

Proposed change to election procedure for the board of directors
The bank’s articles of association currently prescribe that members of the board of direc- tors be elected by the shareholders’ committee from among the committee’s members. This procedure can make it difficult to ensure that the board has members with special expertise - e.g. members with managerial experience from a financial company. The board of directors and the shareholders’ committee have therefore decided to recom- mend a change in the articles of association for approval by the general meeting in
2013 to enable the shareholders’ committee to elect board members who are not mem- bers of the committee.

Payment policy
The remuneration policy for management and the board of directors of Ringkjøbing Landbobank is that the bank’s management is paid remuneration which is both in line with the market and reflects the management’s achievements for the bank. It has also been decided that the remuneration paid to management and the board of directors should be a fixed amount without any form of incentive component. Neither will others involved in risk taking and employees in control functions be paid variable salary com- ponents outside the framework of the collective agreement which was entered into

Supplementary information on members of management, including other managerial activities
Reference is made to pages 85 - 87 of this annual report for supplementary information on the bank’s management, including information on their other managerial activities.
 

 

Information on listed companies
In accordance with Section 133a of the statutory order on financial reports for credit
institutions etc., we advise as follows:
The bank’s share capital on 31 December 2012 was DKK 24.7 million in 4,940,000 nom. DKK 5 shares.
The bank has only one share class, and the entire share capital, and thus all shares, are listed on the NASDAQ OMX Copenhagen. There are no restrictions on the shares’ nego- tiability.
ATP, Hillerød and Parvus Asset Management (UK) LLP have advised that they own more
than 5% of the bank’s share capital.
The following applies to exercising the right to vote:
Each shareholding up to and including nom. DKK 500 carries one vote, and sharehold- ings above this level carry a total of two votes, which is the highest number of votes a shareholder can exercise when the shares are listed in the company’s register of share- holders or when the shareholder has reported and documented his or her right.
The members of the bank’s board of directors are elected by and from among the mem- bers of the bank’s shareholders’ committee.
The following applies to changes to the bank’s articles of association:
A decision to change the articles of association is only valid if the proposal is agreed upon by at least two thirds of votes cast and of the share capital with voting rights rep- resented at the general meeting.
The board of directors has the following powers with respect to the possibility of issuing shares (as per the articles of association):
Following consultation with the shareholders’ committee, the board of directors
is authorised to increase the share capital by nom. DKK 14,210,980 to nom. DKK
38,910,980 in one or more rounds. This authorisation is currently valid until 24 February
2017.
The board of directors has the following powers with respect to the possibility of acquir- ing own shares:
The bank’s annual general meeting of 29 February 2012 has authorised the board of directors, before the next annual general meeting and in accordance with applicable
law, to permit the bank to acquire its own shares to a total nominal value of 10% of the
bank’s share capital, such that the shares can be acquired at the current listed price +/-
10%.

At last year’s general meeting, the board was also authorised to buy 100,000 shares. This authorisation is expected to be fully used before this year’s general meeting.
 

 

 
ST A TEMEN T ,  REPORT S  AND  ACCOUNT S

 

 Page 
 40 Management’s statement
 41 Auditors’ reports
  44  Profit and loss account
  44  Proposed distribution of profit
 45 Core earnings
 46 Balance sheet
 48 Statement of shareholders’ equity
 49 Capital adequacy computation
  50  Cash flow statement
 51 Accounting policies
 55 Notes to the annual report
  78  Five year main figures
  80  Five year key figures
 

Statement by management and the board of directors
The board of directors and management have today considered and approved the annual report of
Ringkjøbing Landbobank A/S for the financial year 1 January - 31 December 2012.

The annual financial statements was prepared in accordance with the provisions of the Act on Financial Activities and other Danish requirements regarding information in the annual financial statements of listed financial companies. We consider the chosen accounting policies to be appropriate and the esti- mates made to be responsible, so that the annual report provides a true and fair picture of the bank’s assets, liabilities and financial position as of 31 December 2012 and the result of the bank’s activities and cash flows for the financial year 1 January - 31 December 2012. We also believe that the manage- ment report contains a true and fair account of the bank’s activities and financial position as well as a description of the most important risks and uncertainties which can affect the bank.

The annual report is recommended for approval by the general meeting. Ringkøbing, 30 January 2013
Management:

John Bull Fisker
CEO

 
Ringkøbing, 30 January 2013
 

Board of directors:
 

 

Jens Lykke Kjeldsen Gravers Kjærgaard
Chairman Deputy Chairman

 

Gert Asmussen Inge Sandgrav Bak

 

Keld Hansen Martin Krogh Pedersen

 

Bo Bennedsgaard Gitte E. S. Vigsø
Employee board member Employee board member
 

Internal auditor’s declarations
To the shareholders of Ringkjøbing Landbobank A/S Certification of the annual financial statements
I have audited the annual financial statements of Ringkjøbing Landbobank A/S for the financial year
1 January - 31 December 2012, covering the profit and loss account and the statement of total income,
core result, balance sheet, statement of changes in equity, statement of capital adequacy, cash flow
statement and notes, including accounting policies and five years’ main and key figures. The annual
financial statements were prepared in accordance with the Danish Act on Financial Activities.

The audit
The audit was performed on the basis of the Danish FSA’s statutory order on the auditing of financial
companies etc. and in accordance with international auditing standards. This requires that the audit
be planned and performed to achieve a high degree of assurance that the financial statements do not
contain material misstatements.

The audit was performed in accordance with the division of labour agreed with the external auditor, and included an assessment of established procedures and internal checks and balances, including the risk management set by management with respect to reporting processes and material business risks. I have made a random sampling of the basis for amounts and other information in the financial state- ments on grounds of probability and risk. The audit also included an assessment of whether manage- ment’s choice of accounting policies is appropriate, whether management’s accounting estimates are reasonable, and the total presentation of the financial statements.

I participated in the audit of all material and risk areas, and I believe that the basis for the audit is ad- equate and appropriate for my conclusion.

Our audit did not give rise to any qualifications.

Conclusion
I believe that the established procedures and internal controls, including the risk management chosen by management for the bank’s reporting processes and material business risks, are functioning satisfac- torily.

I also believe that the annual financial statements provide a true and fair picture of the bank’s assets, liabilities and financial position as of 31 December 2012 and of the result of the bank’s activities and cash flows for the financial year 1 January - 31 December 2012 in accordance with the Danish act on financial activities.

Statement on management report
As required under the act on financial activities, I have read management’s report. I have not performed any further actions in addition to the audit of the annual financial statements. On this basis, I believe that the information in management’s report is in agreement with the annual financial statements.

Ringkøbing, 30 January 2013

 

 

Henrik Haugaard
Chief auditor
 

The independent auditor’s declaration
To the shareholders of Ringkjøbing Landbobank A/S Endorsement of the annual financial statements
We have audited the annual financial statements for Ringkjøbing Landbobank A/S for the financial year
1 January  -31 December 2012, covering the profit and loss account and the statement of total gains
and losses, the core earnings, balance sheet, statement of equity, the capital adequacy ratio, the cash
flow statement and notes, including the accounting policy and five years’ main and key figures. The an-
nual financial statements were prepared in accordance with the Danish act on financial activities.

Management’s responsibility for the annual financial statements
Management is responsible for the preparation of annual financial statements which provide a true and fair picture in accordance with the act on financial activities. Management is also responsible for the internal controls deemed necessary to prepare annual financial statements without material misstate- ments, whether attributable to fraud or error.

The auditor’s responsibility
Our responsibility is to express a conclusion on the annual financial statements on the basis of our audit. We performed the audit in accordance with international auditing standards and additional require- ments under Danish auditing law. These require that we observe ethical requirements and plan and perform the audit in order to achieve a high degree of assurance that the annual financial statements
do not contain material misstatements.

An audit covers the performance of auditing actions to gain evidence for amounts and information in the financial statements. The chosen actions depend on the auditor’s assessment, including an assess- ment of risks of material misstatements in the financial statements whether attributable to fraud of error. In the risk assessment, the auditor considers internal controls that are relevant for the company’s
preparation of annual financial statements which provide a true and fair picture. The object is to design audit actions which are appropriate under the circumstances, but not to express a conclusion on the effectiveness of the company’s internal controls. An audit also includes an assessment of whether management’s choice of accounting policies is appropriate and whether management’s estimates are reasonable, as well as an assessment of the total presentation of the financial statements.

We believe that the evidence we obtained for our audit is an appropriate basis for our conclusion.

Our audit did not give rise to any qualifications.
 

 

Conclusion
We believe that the annual financial statements provide a true and fair picture of the company’s assets, liabilities and financial position as of 31 December 2012 and of the result of the company’s activities and cash flows for the financial year 1 January-31 December 2012 in accordance with the act on finan- cial activities.

Statement on the management report
In accordance with the act on financial activities, we have read the management report. We have not performed any further actions in addition to the audit of the annual financial statements. We believe on this basis that the information in the management report is in accordance with the annual financial statements.

Ringkøbing, 30 January 2013

 

 

PricewaterhouseCoopers
State-authorised partnership

 

H. C. Krogh Alex Nyholm
State-authorised State-authorised
public accountant public accountant
 

 

Note no.  
2012
DKK 1,000 
2011
DKK 1,000
1 Interest receivable 834,021 858,257
2 Interest payable 200,764 245,291
 Net income from interest 633,257 612,966
3 Dividend on capital shares etc. 1,463 1,111
4 Income from fees and commissions 210,516 158,303
4 Fees and commissions paid 24,029 24,312
 Net income from interest and fees 821,207 748,068
5 Value adjustments +46,957 +16,386
 Other operating income 3,303 4,535
6,7,8,9 Staff and administration costs 252,796 244,068
11 Amortisation, depreciation and write-downs on intangible and tangible assets 
3,233 
4,375
 Other operating costs  
 Miscellaneous other operating costs 133 381
 Costs Deposit Guarantee Fund 10,281 11,178
15 Write-downs on loans and other debtors -156,844 -128,799
 Result of capital shares in associated companies +5 +11
 Profit before tax 448,185 380,199
12 Tax 120,188 94,128
 Profit after tax 327,997 286,071
 Other comprehensive income 0 0
 Total comprehensive income 327,997 286,071

 

 

P ROPOSED DISTRIBUTION OF PROFIT

 2012
DKK 1,000 2011
DKK 1,000
  Profit after tax  327,997  286,071
 Total amount available for distribution 327,997 286,071
 Dividend 69,160 65,520
 Charitable purposes 500 500
 Transferred to reserve for net revaluation under the intrinsic value method 
+5 
+11
 Appropriation to own funds 258,332 220,040
 Total distribution of the amount available 327,997 286,071
 

 2012
DKK 1,000 2011
DKK 1,000
Net income from interest 614,617 606,576
Net income from fees and provisions excl. commission 162,371 115,200
Income from sector shares 5,939 4,437
Foreign exchange income 12,591 17,914
Other operating income etc. 3,303 4,535
Total core income excl. trade income 798,821 748,662
Trade income 24,116 18,791
Total core income 822,937 767,453
Staff and administration costs 252,796 244,068
Amortisations, depreciations and write-downs on intangible and tangible assets 
3,233 
4,375
Other operating costs 8,705 381
Total costs etc. 264,734 248,824
Core earnings before write-downs on loans 558,203 518,629
Write-downs on loans and other debtors -156,844 -128,799
Core earnings 401,359 389,830
Result for portfolio +48,535 +1,547
Expenses for bank packages 1,709 11,178
Profit before tax 448,185 380,199
Tax
Profit after tax 120,188
327,997 94,128
286,071
 

Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000
Assets
Cash in hand and claims at call on central banks 483,188 33,935
13 Claims on credit institutions and central banks
Claims at notice on central banks 176,002 186,989
Money market operations and bilateral loans - term to
maturity under 1 year 92,578 536,453
Bilateral loans - term to maturity over 1 year 104,720 590,876
14,15,16 Loans and other debtors at amortised cost price 12,424,139 12,746,560
Loans and other debtors at amortised cost price 11,594,880 11,938,197
Wind turbine loans with direct funding 829,259 808,363
17 Bonds at current value 3,783,258 2,755,912
18 Shares etc. 229,541 249,054
Capital shares in associated companies 543 538
19 Land and buildings total 75,830 74,722
Investment properties 8,165 6,681
Domicile properties 67,665 68,041
20 Other tangible assets 3,981 4,893
Actual tax assets 40,370 12,255
Temporary assets 1,400 1,382
21 Other assets 259,351 348,567
  Periodic-defined items  6,645  6,887
Total assets 17,681,546 17,549,023
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
 Liabilities and equity  
22 Debt to credit institutions and central banks  
 Money market operations and bilateral credits - term to maturity under 1 year 
294,208 
285,028
 Bilateral credits - term to maturity over 1 year 74,604 148,684
 Bilateral credits from the KfW Bankengruppe 829,259 808,363
23 Deposits and other debts 12,866,748 12,755,415
24 Issued bonds at amortised cost price 340,809 338,958
25 Other liabilities 190,830 301,813
  Periodic-defined items  205  183
 Total debt 14,596,663 14,638,444

26 
Provisions for pensions and similar liabilities 
0 
5,146
27 Provisions for deferred tax 15,151 4,789
15 Provisions for losses on guarantees 10,958 5,038
 Total provisions for liabilities 26,109 14,973

28 
Subordinated loan capital 
199,607 
198,014
28 Hybrid core capital 183,027 214,472
 Total subordinated debt 382,634 412,486

29 
Share capital 
24,700 
25,200
 Reserve for net revaluation under the intrinsic value method 192 187
  Profit carried forward   2,581,588  2,391,713
 Proposed dividend etc. 69,660 66,020
 Total shareholders’ equity 2,676,140 2,483,120
 Total liabilities and equity 17,681,546 17,549,023

30 
Own capital shares  
31 Contingent liabilities etc.  
 

 

  

    Reserve for net revalua- tion under the intrin-  

Profit  

Proposed  

Total
 Share sic value carried dividend shareholders’
DKK 1,000 capital method forward etc. equity

2012     
Shareholders’ equity at the end of the previous financial year 
25,200 
187 
2,391,713 
66,020 
2,483,120
Reduction of share capital -500  500  0
Dividend etc. paid    -66,020 -66,020
Dividend received on own shares   1,326  1,326
Shareholders’ equity after allocation of dividend etc. 
24,700 
187 
2,393,539 
0 
2,418,426
Purchase and sale of own shares   -70,283  -70,283
Total comprehensive income  5 258,332 69,660 327,997
Shareholders’ equity on the balance sheet date 
24,700 
192 
2,581,588 
69,660 
2,676,140
2011     
Shareholders’ equity at the end of the previous financial year 
25,200 
176 
2,225,988 
60,980 
2,312,344
Dividend etc. paid    -60,980 -60,980
Dividend received on own shares   168  168
Shareholders’ equity after allocation of dividend etc. 
25,200 
176 
2,226,156 
0 
2,251,532
Purchase and sale of own shares   -58,391  -58,391
Other shareholders’ equity items   3,908  3,908
Total comprehensive income  11 220,040 66,020 286,071
Shareholders’ equity on the balance sheet date 
25,200 
187 
2,391,713 
66,020 
2,483,120
 

 

Calculated pursuant to the Executive order on Capital Adequacy issued by the Danish Financial Supervisory Authority.
 
End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
 

Weighted items with credit and counterpart risks 10,601,717 11,041,407
Market risk 1,219,598 750,457
Operational risk 1,483,500 1,396,138
Total risk-weighted items 13,304,815 13,188,002

Share capital 24,700 25,200
Reserve for net revaluation under the intrinsic value method 192 187
Profit carried forward    2,651,248  2,457,733
Core capital 2,676,140 2,483,120
Proposed dividend etc. -69,660 -66,020
Addition to/deduction from the core capital -192 -187
Core capital after deductions 2,606,288 2,416,913
Hybrid core capital 172,000 200,000
Core capital after deductions incl. hybrid core capital 2,778,288 2,616,913
Subordinated loan capital 201,431 200,723
Addition to/deduction from the capital base 192 187
Capital base after deductions 2,979,911 2,817,823

Core capital ratio excl. hybrid core capital (%) 19,6 18.3
Core capital ratio (%) 20,9 19.8
Solvency ratio (%) 22,4 21.4

Capital base requirements under Section 124 (2,1) of the
Danish Financial Business Act 1,064,385 1,055,040
 

 2012
DKK 1,000 2011
DKK 1,000

Operation activities  
Profit for the financial year  327,997  286,071
Amortisations, depreciations and write-downs on intangible and tangible assets 
3,233 
4,375
Write-downs on loans and debtors etc. 198,529 164,539
Items not affecting liquidity 11,135 5,127
Adjusted result of operations 540,894 460,112

Changes in operating capital  
Claims on and debt to credit institutions etc., net 909,261 -1,478,199
Loans and other debtors at amortised cost price 123,892 240,117
Securities, not liquid and pledged 234,305 100,393
Deposits and other debts 111,333 1,093,761
Issued bonds at amortised cost price 1,851 1,341
Subordinated capital -29,852 -284,513
Other assets and liabilities, net -48,862 -161,852
Cash flows from operating activities 1,842,822 -28,840

Investment activities  
Intangible and tangible assets -4,207 -4,268
Cash flows from investment activities -4,207 -4,268

Financing activities  
Paid dividend, net -64,694 -60,812
Own shares etc. -70,283 -58,391
Cash flows from financing activities -134,977 -119,203

Total effect on liquidity for the year 
1,703,638 
-152,311
Cash and cash equivalents, beginning of year 2,660,366 2,812,677
Cash and cash equivalents, end of year 4,364,004 2,660,366

Cash and cash equivalents, end of year specified thus:  
Cash in hand and claims at call on central banks 483,188 33,935
Claims on credit institutions and central banks 217,146 204,899
Securities, unpledged 3,663,670 2,421.532
Total cash and cash equivalents, end of year 4,364,004 2,660,366

The cash flow statement cannot be derived from this annual report, and the statement has also been adapted
to the special statement of accounts etc. for banks.
 

Basis for preparing the annual report
General
The annual report is prepared in accordance with the provisions of the Danish Financial Business Act
and the applicable Executive Order on Financial Reports for Credit Institutions and Investment Compa-
nies etc. The annual report is also prepared in accordance with the disclosure requirements of NASDAQ
OMX Copenhagen (Copenhagen Stock Exchange), to the extent to which the Danish Financial Business
Act, the Executive Order on Financial Reports for Credit Institutions and Investment Companies etc.
or other Executive Orders from the Danish Financial Supervisory Authority do not specify a different
practice.
The annual report is presented in DKK rounded to the nearest 1,000 kroner. The accounting policies are unchanged relative to last year.
Inclusion and measuring - general
Assets are included in the balance sheet when it is probable that future financial advantages will accrue
to the bank and the value can be measured reliably. Liabilities are included in the balance sheet, when
they are probable, and that they can be measured reliably.
Income is included in the profit and loss account in step with its earning. Costs paid to achieve the income for the year are included in the profit and loss account, and value adjustments made to financial assets, financial liabilities and derivative financial instruments are also included in the profit and loss account.
Regarding the criteria for inclusion and the basis of measurement we refer to the following sections.
Accounting estimates
In computing the book value of certain assets and liabilities, an estimate has been made of how future
events will affect the value of the assets and liabilities on the balance sheet date.
The estimates made are based on assumptions which management judges to be responsible, but which are not certain. The final actual results may thus deviate from the estimates as the bank is subject to risks and uncertainties which can affect the results.
The most important estimates concern write-downs on loans and debtors, computation of current values for unlisted financial instruments, and provisions for liabilities. The most important estimates on write-downs on loans and debtors are associated with quantification of the risk that no future payments will be received.
Foreign currency
Assets and liabilities in foreign currency are converted to Danish kroner at the closing exchange rate for
the currency on balance sheet date, corresponding to the rate published by the Central Bank of Den-
mark. Income and expenses are converted continuously at the exchange rate on the transaction date.
Financial instruments - general
In general, the bank measures financial assets and liabilities at current value on first inclusion. Measuring
is subsequently made at current value unless otherwise specifically emerges from the following sections
on the individual accounts items. The bank uses the date of payment as the date of entry for financial
instruments.
Derivative financial instruments
Forward transactions, interest rate swaps and other derivative financial instruments are included at cur-
rent value on balance sheet date.
Hedging transactions which, under the terms of the Danish Financial Supervisory Authority’s Executive Order on Financial Reports for Credit Institutions and Investment Companies etc. are regarded as hedg- ing at current value for accounting purposes are included at current value on the balance sheet date with respect to both the hedging instrument and the hedged part of the financial instrument.
All value adjustments concerning derivative financial instruments and items subject to hedging for ac-
counting purposes are entered under the item »Value adjustments« in the profit and loss account.
 

The profit and loss account
Interest income
Interest income is included on the basis of the effective interest method, under which interest income
also includes the allocated portion of establishment fees etc. which are considered to be a part of the
effective interest on the loan.
On loans which in full or in part have been written down, the interest income relating to the written- down part is entered under the item »Write-downs on loans and debtors etc.«.
Income from fees and commissions, net
Fees and commissions relating to loans and receivables are recognized as part of the carrying amount
of loans and receivables and are recognized in the profit and loss account over the term of the loans
and receivables as part of the effective interest rate on the loans as interest income, as referred to in
the above section »Interest income«. Commissions relating to garantees are carried to income over the
term of the garantees. Income generated upon performing a given transaction, including securities and
custodianship fees plus payment handling fees, are recognised as income when the transaction has been
performed.
Staff and administration costs
Staff and administration costs comprise among other things salaries, pension costs, IT-costs, etc.
Write-downs on loans and debtors etc.
This item includes losses and write-downs on loans and other debtors and losses and provisions on
guarantees. The item also includes losses and write-downs on claims on credit institutions and losses
and provisions on the national bank package I.
Tax
Tax on the profit for the year is booked as a cost in the profit and loss account.
Net deferred tax is calculated on the items which cover the temporary differences in accounting and booking of taxable income and expenses at the tax rate applicable on the balance sheet date.
Core earnings
The core earnings show a statement of the bank’s income and costs. In total, the core earnings contain
the same items as the profit and loss account but with a different degree of specification.
The statement divides the year’s result into three main elements; core earnings, result for the portfolio, and costs of the Guarantee Fund for Depositors and Investors. Interest and dividends are included in the result for the portfolio and funding costs for the bank’s trading portfolio and extraordinary adjustments to sector shares are deducted.
The balance sheet
Claims on credit institutions and central banks
The first inclusion is made at current value plus transactions costs, less establishment fees etc., and
subsequent measurement is at amortised cost price, but reference is made to the section »Derivative
financial instruments« with respect to hedging for accounting purposes.
Loans and other debtors
The first inclusion is made at current value plus transaction costs, less establishment fees etc., and
subsequent measurement is at amortised cost price. Establishment fees etc. which are comparable with
ongoing interest payments, and are thus deemed to be an integral part of the effective interest on the
loan, are accrued over the life of the individual loan.
If an objective indication of impairment is found on an individually assessed loan, a write-down is made to cover the bank’s loss on the basis of expected future payments series based on an assessment of the most likely outcome.
With respect to loans and receivables which have not been written down individually, a group-wise as- sessment is made of whether there is an objective indication of impairment in value for the group.
This group-wise assessment is made on groups of loans and debtors with uniform characteristics with respect to credit risk. 12 groups are used, one of public clients, one of private clients and 10 of business clients, the latter further grouped by sector.
The group-wise assessment is made on the basis of a segmentation model developed by the Association of Local Banks, Savings Banks and Cooperative Savings Banks in Denmark, which undertakes the ongoing maintenance and development. The segmentation model sets the relationship in the individual groups
 

between losses suffered and a number of significant explanatory macroeconomic variables via a linear regression analysis. The explanatory macroeconomic variables include unemployment, house prices, interest rates, number of bankruptcies/forced auctions etc.
The macroeconomic segmentation model is initially calculated on the basis of loss data for the entire banking sector. The bank has therefore made an assessment of whether the model estimates reflect the credit risk for the bank’s own loan portfolio.
This assessment has resulted in an adaptation of the estimates under the model to the bank’s own circumstances, under which the adapted estimates form the basis for calculation of the group write- downs. The adjusted estimates were further corrected to take account of the changed economic conditions. For each group of loans and debtors, there is an estimate which expresses the percentage decrease in value associated with a given group of loans and debtors on the balance sheet date. A comparison of the individual loan’s current risk of loss with the loan’s original risk of loss and its risk of loss at the beginning of the current accounting period provides the individual loan’s contribution to
the group write-downs. The write-down is calculated as the difference between the book value and the discounted value of the expected future payments.
Changes in write-downs which have been made are adjusted in the profit and loss account under the
item »Write-downs on loans and debtors etc.«.
Bonds and shares
Securities which are listed on a stock exchange are included at current value, determined on the basis
of the closing price on balance sheet date.
Unlisted securities are also included at current value, computed on the basis of what the price would be in a transaction between independent parties. The management takes an active approach to the calculation of this market value.
All ongoing value adjustments to listed and unlisted securities are entered in operations under the item
»Value adjustments«.
Capital shares in associated companies
Capital shares in associated companies are entered in the balance sheet under the intrinsic value method.
Land and buildings
Land and buildings cover the two items »Investment properties« and »Domicile properties«. The prop-
erties which house the bank’s branches are included under domicile properties, while other properties
are considered to be investment properties.
Investment properties are included in the balance sheet at current value, computed under the yield method. Ongoing changes in value concerning investment properties are included in the profit and loss account.
Domicile properties are included in the balance sheet at reassessed value, which is the current value computed on the basis of the yield method less cumulative depreciation and any loss due to impairment. Depreciation is calculated on the basis of expected useful life, which is 50 years, on the basis of depreciation computed as cost price less scrap value. Depreciations and losses due to impairment are included in the profit and loss account, while increases in the reassessed value are included directly on the shareholders’ equity under the item »Provisions for revaluation« unless the increase corresponds to a reduction in value which was previously included in the profit and loss account.
Other tangible assets
Other tangible assets including operating equipment are included in the balance sheet at cost price less
cumulative depreciation and write-downs for any loss due to impairment. Depreciations are calculated
on the basis of the assets’ expected lives, which are 1-5 years, on the basis of depreciation computed
as cost price less scrap value. Depreciations and losses due to impairment are included in the profit and
loss account.
Temporary assets
Temporary assets comprise assets taken over as a result of the unwinding of customer engagements, the
intention being to sell off the assets as soon as possible. Temporary assets are included at cost price on
transfer and will subsequently be written down to a possibly lower realisation value.
Other assets
Other assets include interest and commissions receivable as well as the positive market value of deriva-
tive financial instruments.
 

Tax
Actual tax assets and actual tax liabilities are recognized in the balance sheet as tax calculated on the
taxable income for the year, adjusted for tax paid on account.
A deferred tax liability is allocated under the item »Provisions for deferred tax« and if a deferred tax as- set is booked under the item »Deferred tax assets« following a cautious assessment of the asset’s value. Debt to credit institutions and central banks / Deposits and other debts / Issued bonds at amor- tised cost price / Subordinated debt
Measurement is at amortised cost price, but reference is made to the section »Derivative financial in- struments« with respect to hedging for accounting purposes.
Other liabilities
Other liabilities include interest and commissions payable and the negative marked value of derivative
financial instruments.
Provisions for liabilities
Provisions for liabilities include mainly provisions for pensions, deferred tax and losses on guarantees. A provision is recognized in respect of a guarantee or an irrevocable credit commitment if it is likely that the guarantee or the credit commitment will be exercised and the amount of the commitment can be reliably determined. Provisions are based on Management’s best estimate of the amount of the commitments. In measuring provisions for liabilities, discounting to net present value is made where deemed material.
Various informations
Contingent liabilities/guarantees
The bank’s outstanding guarantees are given in the notes under the item »Contingent liabilities«. If it is considered likely that an outstanding guarantee will incur a loss to the bank, the liability is given under the item »Provisions for losses on guarantees« and booked under costs in the profit and loss account under the item »Write-downs on loans and debtors etc.«
Cash flow statement
The cash flow statement is presented in accordance with the indirect method on the basis of the result
for the year, adjusted for non-liquid items.
The statement shows net changes in the balance sheet, and on some points it will therefore not provide
the full picture of the actual cash flows.
The cash flows from the operating activity are computed as the result for the year, adjusted for non- liquid items and changes in operating capital. Cash flows from the investment activity cover purchases and sale of fixed assets etc. Cash flows from the financing activity cover movements and allocations in subordinated debt and in shareholders’ equity.
Liquid assets cover cash in hand, claims at call on the Central Bank of Denmark, fully secured and liquid claims at call on banks, unpledged certificates of deposit issued by the Central Bank of Denmark, and secure and easily saleable listed unpledged securities, under Section 152 of the Danish Financial Business Act. Information and key figures
»Total capital base« on page 3 under »Main figures for the bank« is computed as the banks capital base
after deductions.
The »Pre-tax return on equity at the beginning of the year«, and the »Return on equity after tax at
the beginning of the year« as given on page 3 under »Key figures for the bank« were calculated after
deduction of dividend etc., net.
»Key figures per DKK 5 share« on page 3 were calculated on the basis of 2012: 4,840,000 shares, 2011:
4,940,000 shares and 2008 to 2010: 5,040,000 shares.
All calculations etc. concerning write-downs on pages 3, 8 and 20 were made exclusive of amounts under the national bank package I etc.
With effect from 2008, the bank changed the calculation of the key figure »Rate of costs«. The key figure is now calculated as »Total costs etc.« (including depreciation on tangible fixed assets) divided by »Total core income« multiplied by 100. The comparative figures on the pages 3 and 7 have been adjusted for the change method of calculation.
The key figure “Total large exposures” have been corrected for 2011 and 2010 so that outstanding accounts of less than one billion kroner with credit institutions are not included under major commit- ments as per the Danish Financial Supervisory Authority guideline on the reporting of accounts.
It is noted, that the individual solvency requirement (reported at page 12, 16 and 17) not is audited.
 

Note 2012 2011
no. DKK 1,000 DKK 1,000

1 Interest receivable
Claims on credit institutions and central banks 10,943 38,712
Loans and other debtors 769,656 775,891
Loans - interest concerning the written-down part of loans -41,685 -35,740
Bonds 86,941 58,993
  Total derivatives financial instruments,  8,016  20,069
of which
Currency contracts 4,880 9,205
Interest-rate contracts 3,136 10,864
Other interest receivable 150 332
Total interest receivable 834,021 858,257

2 Interest payable
Credit institutions and central banks 27,163 44,311
Deposits and other debts 146,108 169,174
Issued bonds 11,496 12,887
Subordinated debt 15,828 18,605
Other interest payable 169 314
Total interest payable 200,764 245,291

3 Dividend on capital shares etc.
Shares 1,463 1,111
Total dividend on capital shares etc. 1,463 1,111

4 Fees and commissions

Gross income from fees and commissions
Securities trading 28,279 24,117
Asset management 75,271 53,997
Payment handling 20,898 19,679
Loan fees 14,578 7,817
Guarantee commissions 41,371 34,898
Other fees and commissions 30,119 17,795
Total gross income from fees and commissions 210,516 158,303

Fees and commissions paid
Securities trading 4,163 5,326
Asset management 4,289 4,110
Payment handling 2,462 2,061
Loan fees 2,514 1,765
Other fees and commissions 10,601 11,050
Total fees and commissions paid 24,029 24,312

Net income from fees and commissions
Securities trading 24,116 18,791
Asset management 70,982 49,887
Payment handling 18,436 17,618
Loan fees 12,064 6,052
Guarantee commissions 41,371 34,898
Other fees and commissions 19,518 6,745
Total net income from fees and commissions 186,487 133,991
Foreign exchange income 12,591 17,914
Total net income from fees, commissions and
foreign exchange income 199,078 151,905
 

Note 2012 2011
no. DKK 1,000 DKK 1,000

5 Value adjustments
Loans and other debtors at current value* 6,433 6,746
Bonds 78,318 2,619
Shares etc. -25,862 -1,276
Investment properties -415 -579
Foreign exchange income 12,591 17,914
  Total derivative financial instruments,  -26,497  -10,050
of which
Interest-rate contracts -26,497 -10,050
Issued bonds 1,041 -744
Other liabilities 1,348 1,756
Total value adjustments 46,957 16,386
* Cf. note 36.

6 Staff and administration costs
Payments to board of managers,
board of directors and shareholders’ committee
Board of managers*/**:
John Fisker:
Fixed payment 3,870 3,274
Bent Naur:
Fixed payment 1,317 3,963
Total payment 5,187 7,237

Board of directors***:
Jens Lykke Kjeldsen, chairman 243 242
Gravers Kjærgaard, deputy chairman 162 162
Gert Asmussen 126 125
Keld Hansen 126 125
Martin Krogh Pedersen 126 83
Inge Sandgrav Bak 126 83
Bo Bennedsgaard 126 125
Gitte E. S. Vigsø 126 104
Total payment 1,161 1,049
Shareholders committee:
Total payment 318 336
Total 6,666 8,622

Staff costs
Salaries 111,848 111,030
Pensions 11,478 11,522
Social security expenses 917 900
Costs depending on number of staff 14,978 14,719
Total 139,221 138,171
Other administration costs 106,909 97,275
Total staff and administration costs 252,796 244,068

* Management does not receive variable payment.
** The management has a company car.
*** The board of directors’ fee is fixed.
 

Note 2012 2011
no. DKK 1,000 DKK 1,000

7 Number of employees
  Average number of employees during the financial year
converted into full-time employees 244 252

8 Payment to major risk takers and control functions
Fixed salary 4.136 -
Variable salary 150 -
Pension 454 -
Total 4.740 -
Number of full-time employees 5 -

9 Incentive programmes
The bank has no incentive programmes.

10 Fee to the auditor elected by the general meeting
Statutory audit 610 603
Other declarations with security 131 27
Advice on tax 5 19
Other services 0 13
Total fee to the auditor elected by the general meeting 746 662
It is noted, that the bank has an internal auditor.

11 Amortisations, depreciations and write-downs on intangible and tangible assets

Tangible assets
Domicile properties, depreciations 684 1,353
Other tangible assets, depreciations 2,549 3,022
Total amortisations, depreciations and write-downs on
intangible and tangible assets 3,233 4,375

12 Tax
  Tax calculated on the years profit  109,075  93,159
Adjustment of deferred tax 10,362 860
Adjustment of tax calculated for previous years 751 109
Total tax 120,188 94,128

Effective tax rate (%):
The current tax rate of the bank 25.0 25.0
Permanent deviations 1.6 -0.2
Adjustment of tax calculated for previous years 0.2 0.0
Total effective tax rate 26.8 24.8
 

 

13 Claims on credit institutions and central banks
 

End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
 
Claims at call 41,144 17,910
Up to and including 3 months 226,002 661,989
More than 3 months and up to and including 1 year 1,434 43,543
More than 1 year and up to and including 5 years 104,220 590,876
More than 5 years 500 0
Total claims on credit institutions and central banks 373,300 1,314,318

Distributed as follows:
Claims at notice on central banks 176,002 186,989
Claims on credit institutions 197,298 1,127,329
373,300 1,314,318
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
14 Loans and other debtors at amortised cost price
At call 
2,027,476 
2,689,793
 Up to and including 3 months 597,833 476,999
 More than 3 months and up to and including 1 year 1,354,204 2,016,455
 More than 1 year and up to and including 5 years 4,300,538 3,666,432
 More than 5 years 4,144,088 3,896,881
 Total loans and other debtors at amortised cost price 12,424,139 12,746,560
15 Write-downs on loans and other debtors and provisions for losses on guarantees  

  Individual write-downs
Cumulative individual write-downs on loans and other debtors
at the end of the previous financial year  

577,352  

532,441

  Write-downs/value adjustments during the year
Reverse entry - write-downs made in previous financial years  243,459
-124,433  205,130
-110,870
 Booked losses covered by write-downs
Cumulative individual write-downs on loans and
other debtors on the balance sheet date -63,849

632,529 -49,349

577,352

  Group write-downs
Cumulative group write-downs on loans and other debtors
at the end of the previous financial year  

67,466  

31,211
 Write-downs/value adjustments during the year
Cumulative group write-downs on loans and
other debtors on the balance sheet date 47,410

114,876 36,255

67,466
 Total cumulative write-downs on loans and other debtors on the balance sheet date 
747,405 
644,818

  Provisions for losses on guarantees
Cumulative individual provisions for losses on guarantees at
the end of the previous financial year  

5,038  

1,383

  Provisions/value adjustments during the year
Reverse entry - provisions made in previous financial years  10,009
-3,835  4,605
-885
 Booked losses covered by write-downs
Cumulative individual provisions for losses on guarantees
on the balance sheet date -254

10,958 -65

5,038
 Total cumulative write-downs on loans and other debtors and provisions for losses on guarantees on the balance sheet date 
758,363 
649,856
16 Suspended calculation of interest
Loans and other debtors with suspended calculation of
interest on the balance sheet date 

113,312 

61,419
17 Bonds at current value
Listed on the stock exchange* 
3,783,258 
2,755,912
 Total bonds at current value 3,783,528 2,755,912
 
* See page 22 of the management report, where the rating is stated.  
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
18 Shares etc.  
 Listed on NASDAQ OMX Copenhagen 29,104 12,033
 Unlisted shares at current value 1,505 1,460
 Sector shares at current value 182,101 214,583
 Other holdings 16,831 20,978
 Total shares etc. 229,541 249,054
19 Land and buildings  
 Investment properties  
  Current value at the end of the previous financial year  6,681  7,261
 Acquisitions during the year, including improvements 2,184 0
 Disposals during the year -206 0
 Value adjustments to current value for the year -494 -580
 Current value on the balance sheet date 8,165 6,681
 Domicile properties  
  Reassessed value at the end of the previous financial year  68,041  68,401
 Acquisitions during the year, including improvements 308 993
 Depreciations for the year -559 -553
 Value adjustments to current value for the year -125 -800
 Total reassessed value on the balance sheet date 67,665 68,041
 When measuring investment and domicile properties a rate of return between 6% and 8% is used. No external experts were involved in the valuation of investment and domicile properties.  

20 
Other tangible assets  
 Cost price  
  Cost price at the end of the previous financial year   
 without depreciations and write-downs 28,824 28,399
 Acquisitions during the year, including improvements 2,218 3,557
 Disposals during the year -1,525 -3,132
 Total cost price on the balance sheet date 29,517 28,824
 Write-downs and depreciations  
 Write-downs and depreciations at the end of the previous  
  financial year  23,931  23,969
 Depreciations for the year 2,548 3,022
 Reverse entry of previous years’ write-downs during the year and  
 reverse entry of total depreciations and write-downs on assets  
 which were sold or taken out of operation during the year -943 -3,060
 Total depreciations and write-downs on the balance sheet date 25,536 23,931
 Total other tangible assets on the balance sheet date 3,981 4,893
21 Other assets  
 Interest and commissions receivable 51,425 58,383
  Positive market value of derivative financial instruments  172,253  267,853
 Miscellaneous receivables and other assets 35,673 22,331
 Total other assets 259,351 348,567
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
22 Debt to credit institutions and central banks  
 Debt payable on demand 214,603 210,686
 Up to and including 3 months 30,726 26,619
 More than 3 months and up to and including 1 year 169,143 150,127
 More than 1 year and up to and including 5 years 516,937 583,111
 More than 5 years 266,662 271,532
 Total debt to credit institutions and central banks 1,198,071 1,242,075
 Distributed as follows:  
 Debt to credit institutions 1,198,071 1,242,075
  1,198,071 1,242,075
 The bank has undrawn long-term committed revolving credit  
 facilities equivalent to:  
 Term to maturity under 1 year 74,604 100,000
 Term to maturity over 1 year 0 74,342
 Total 74,604 174,342
23 Deposits and other debts  
 On demand* 7,536,906 6,372,268
 Deposits and other debts at notice:  
 Up to and including 3 months 1,487,572 2,166,283
 More than 3 months and up to and including 1 year 908,664 1,175,194
 More than 1 year and up to and including 5 years 1,414,739 1,561,041
 More than 5 years 1,518,867 1,480,629
 Total deposits and other debts 12,866,748 12,755,415
 Distributed as follows:  
 On demand 6,557,380 5,822,693
 At notice 175,268 146,889
 Time deposits 2,921,952 3,740,496
 Long-term deposit agreements 1,906,942 1,805,129
 Special types of deposits* 1,305,206 1,240,208
  12,866,748 12,755,415
 * Special types of deposits are entered under the item »On demand«  
 pending payment, while in the specification of the different types of deposits,   
 the sum is instead included under »Special types of deposits«.  
24 Issued bonds at amortised cost price  
 Up to and including 3 months 4,583 2,955
 More than 3 months and up to and including 1 year 220,000 0
 More than 1 year and up to and including 5 years 116,226 336,003
 Total issued bonds at amortised cost price 340,809 338,958
 Distributed as follows:  
 Issues in Danish kroner  
 Nom. DKK 220 million 220,000 220,000
 Issues in Norwegian kroner  
 Nom. NOK 100 million* 101,670 95,880
 Regulation at amortised cost price and adjustment to  
 current value of issues in Norwegian kroner 8,256 9,241
 Other issues 10,883 13,837
 
* Cf. note 36. 340,809 338,958
 

Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000

25 Other liabilities
Interest and commissions payable 41,469 56,166
  Negative market value of derivative financial instruments  55,635  159,683
Micellaneous payables and other liabilities 93,726 85,964
Total other liabilities 190,830 301,813

26 Provisions for pensions and similar liabilities*
The provisions concern conditional pension commitments to
current members of the board of managers and a pension com-
mitment to a former member of the board of managers from a
merged bank. 0 5,146
* The sum was paid in 2012.

27 Provisions for deferred tax
The calc. provisions for defer. tax relates to the balance sheet items:
Loans and other debtors -2,177 -1,446
Tangible assets -670 -644
Provisions for liabilities 0 -1,287
Other assets/liabilities 17,998 8,166
Total provisions for deferred tax 15,151 4,789
  Deferred tax is calculated at (%)  25.0  25.0

 
28 Subordinated debt
 

Possible
Interest early
rate Cur- Due redemption
 
  Type  (%)  rency  Mill.  date  date
Subordinated loan capital
Bilateral agreement** Floating   EUR    27 30 June 2021  30 June 2018 201,431 200,723
Total subordinated loan capital 201,431 200,723

Hybrid core capital
Bond loan***/****  4.795  DKK    200   Indefinite  2 March 2015 200,000 200,000
Total hybrid core capital 200,000 200,000

Subordinated debt included in the calculation
of the capital base (before deduction of own holding) 401,431 400,723
Regulation at amortised cost price and adjustment to current value 9,203 11,763
Own holding of subordinated loan capital -28,000 0
Total subordinated debt 382,634 412,486

** The interest rate will change on 30 June 2018 to a quarterly variable rate equivalent to the
EURIBOR rate for a term of three months plus 3.50% p.a.
Interest - 2012: tDKK 6,332  / 2011: tDKK 7,634
*** The interest rate will change on 2 March 2015 to a quarterly variable coupon rate equivalent to the CIBOR rate published by the Central Bank of Denmark for a term of three months plus 2.16% p.a. Interest - 2012: tDKK 9,496 / 2011: tDKK 9,720
**** Admitted for listing on NASDAQ OMX Copenhagen.
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
29 Share capital  
 Number of shares at DKK 5 each:  
 Beginning of year 5,040,000 5,040,000
 Cancellation of shares during the year -100,000 0
 End of year 4,940,000 5,040,000
 Reserved for subsequent cancellation* 90,000 100,000
 Share capital 24,700 25,200
 The whole share capital has been admitted for listing on
NASDAQ OMX Copenhagen.  
 * A further 10,000 were also transferred in January 2013 for later cancellation.  
30 Own capital shares  
 Own capital shares included in the balance sheet at 0 0
 The market value is 73,978 58,395
 Number of own shares:  
 Beginning of year 100,855 9,517
 Purchase of own shares during the year 335,686 263,030
 Sale of own shares during the year -240,466 -171,692
 Cancellation of shares during the year -100,000 -
 End of year 96,075 100,855
 Nominal value of holding of own shares, end of year 480 504
  Own shares’ proportion of share capital end of year (%):  
 Beginning of year 2.0 0.2
 Purchase of own shares during the year 6.8 5.2
 Sale of own shares during the year -4.9 -3.4
 Cancellation of shares during the year -2.0 -
 End of year 1.9 2.0
 Total purchase price for shares acquired during the year 245,185 226,968
 Total sales price for shares sold during the year 174,902 168,577
 The transactions for the year in own shares were made on the basis  
 of the bank’s ordinary trading with shares.  
31 Contingent liabilities etc.  
 Contingent liabilities  
 Finance guarantees 693,774 653,353
 Guarantees for foreign loans 5,595 5,576
 Guarantees against losses on mortgage credit loans 51,951 50,138
 Guarantees against losses Totalkredit 122,797 118,540
 Registration and conversion guarantees 70,999 55,361
 Sector guarantees 46,816 39,413
 Other contingent liabilities 675,168 129,841
 Total contingent liabilities 1,667,100 1,052,222
32 Assets furnished as security  
 First mortgage loans were provided for German wind turbine  
 projects. The loans are funded directly by KfW Bankengruppe,  
 to which security in the associated loans has been provided.  
  Each reduction of the first mortgage loans is deducted directly   
 from the funding at the KfW Bankengruppe. 829,259 808,363
 As security for clearing and any debt, the bank has pledged  
 securities from its holding to the Central Bank of Denmark  
 to a total market price of 250,623 269,005
 

Note no.

33 Legal proceedings, etc.
The bank is not party to any legal proceedings that are estimated to result in major losses and in
that way to a substantial change of the accounts.

34 Related parties
Related parties are among others the bank’s board of directors and board of managers, manage-
rial employees and their relatives. Ringkjøbing Landbobank advises that it has no related parties
with a controlling influence on the bank (defined as control of at least 20% of the voting rights).
There were no transactions during the year with the board of directors and board of manag- ers or managerial employees apart from the payment of salaries and compensation etc., stock exchange business and the provision of loans and guarantees.
It is also noted that all of the transactions performed in 2012 and 2011 with related parties, including credit facilities, were carried out on market terms or a cost-cover basis.
Information on the remuneration made to the board of directors and board of managers is given in note 6.
Information on the size of loans, mortgages, sureties and guarantees provided to members of the bank’s board of directors and board of managers and the security received is given in this note. The information in the note covers these parties’ personal engagements and those of their relatives.
Information on the shareholdings held by the board of directors and board of managers is given in this note.

 

The amount of loans issued to and mortgages, sureties or guarantees issued for the members
of the bank’s: Interest rates 2012
 
End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
 
Board of managers (Mastercard) 250 250
     Board of directors, incl. elected by the staff      1.0%-10.0%  19,012  29,510
All engagements are performed under market terms, including both interest and guarantee commission rates.
Security pledged from members of the bank’s:
Board of managers 0 0
Board of directors, incl. elected by the staff 2,234 1,206

New loans have been granted for 1,162 -

 

The board of directors’ and the board of managers’ share- holdings* in Ringkjøbing Landbobank at the end of the year The board of directors:
 
End Dec. 2012 End Dec. 2011
Number of shares   Number of shares
 
Jens Lykke Kjeldsen 5,865 5,815
Gravers Kjærgaard 6,663 6,663
Gert Asmussen 4,528 4,528
Keld Hansen 16,636 16,636
Inge Sandgrav Bak 2,448 2,488
Martin Krogh Pedersen 6,501 6,501
Bo Bennedsgaard 530 530
Gitte E. S. Vigsø 30 30
The board of managers:
John Fisker 15,192 15,192
Bent Naur** - 16,944
* Stated in accordance with the rules on insiders.
** Resigned from management on 30 April 2012.
 

Note
Eno.

35 Current value of financial instruments
Financial instruments are measured in the balance sheet at either current value or amortised cost
price (with consideration to risk cover that fulfil the conditions applying to hedging).
The current value is the amount at which a financial asset can be sold or the amount at which a financial liability can be redeemed between agreed independent parties. The current values of financial assets and liabilities valued on active markets are calculated on the basis of observed market prices on the balance sheet date. The current values of financial instruments which are not valued on active markets are calculated on the basis of generally recognised methods of valuation.
Shares etc. and derivative financial instruments are measured in the accounts at market value
such that included book values correspond to current values.
The write-downs on loans are assessed such that they correspond to changes in credit quality. The difference from current value is assessed as fees and commissions received, costs incurred in lending activities, and, for fixed-interest loans, the value adjustment which is independent of the interest level and which can be calculated by comparing the actual market interest rate with the nominal rate applying to the loans.
The current value of claims on credit institutions and central banks is determined under the same method as for loans, but the bank has not currently made any write-downs on claims on credit institutions and central banks.
Issued bonds and subordinated debt are measured at amortised cost price. The difference be- tween book and current values is calculated on the basis of prices on the market for own listed issues.
For variable-interest financial liabilities in the form of deposits and debts to credit institutions measured at amortised cost price, it is estimated that the book value corresponds to the current value.
For fixed-interest financial liabilities in the form of deposits and debts to credit institutions measured at amortised cost price, the difference from current values is estimated to be the value adjustment which is independent of interest level.

 

Financial assets
 
End Dec. 2012 End Dec. 2011
Book value   Current value Book value   Current value
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
 
Cash in hand + claims at call on central banks 483,188 483,188 33,935 33,935
Claims on credit institut. and central banks* 373,612 373,612 1,318,375   1,318,376
Loans and other debtors at amort. cost price*  12,452,751  12,508,615   12,777,305  12,828,656
Bonds at current value* 3,799,528   3,799,528 2,774,316   2,774,316
Shares etc. 230,084 230,084 249,592 249,592
Derivative financial instruments  172,253  172,253  267,853  267,853
Total financial assets 17,511,416 17,567,280  17,421,376 17,472,728

Financial liabilities
Debt to credit institutions and central banks*   1,198,895   1,198,472 1,243,364   1,242,551
Deposits and other debts* 12,893,489 12,934,285  12,798,121 12,835,712
Issued bonds at amortised cost price*/** 345,475 337,219 343,374 334,133
Derivative financial instruments  55,635  55,635  159,683  159,683
Subordinated debt*/** 390,660 372,857 420,519 396,256
Total financial liabilities 14,884,154 14,898,468  14,965,061 14,968,335

* The item includes calculated interest on the balance sheet date. The calculated interest in the balance sheet is included under the items »Other assets« and »Other liabilities«.
** Using the most recently listed transaction price before the balance sheet date, irrespective of the liquidity in the security in question.
 

Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000

36 Hedging

The following are hedged:
  Fixed interest claim on a credit institution, fixed interest loans,
  fixed interest deposits, issued bonds at amortised cost price,
  floating interest subordinated loan capital and fixed interest
hybrid core capital

Risk cover:
Interest rate risk and foreign exchange risk

Book values:
Claim on a credit institution 0 30,077
Loans 44,785 54,291
Deposits 0 306,726
Issued bonds at amortised cost price 109,926 105,121
Subordinated loan capital 199,607 198,014
Hybrid core capital 183,027 214,472

Cover is thus:
Interest swaps - total synthetic principal 198,542 512,368
Currency swaps - total synthetic principal 303,101 296,603
Total current value 11,113 22,355

37 Risks and risk management
As described in the section on risk »Risks and risk management« in the management report con-
tained in the annual report, Ringkjøbing Landbobank is exposed to various types of risk. See the
section on risks on pages 18 - 29 of the management report for a description of financial risks
and policies and objectives for their management:
•   Credit risks - page 19
•   Interest rate risk - page 24
•   Foreign exchange risk - page 24
•   Share risk - page 25
•   Liquidity risk - page 27
The following notes to the annual report contain some additional information and a more de- tailed description of the bank’s credit and market risks.
 

Note no.  End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
38 Credit risk  
 Maximum credit exposure classified by balance sheet and off-balance sheet items  
 Balance sheet items
Cash in hand and claims at call on central banks 
483,188 
33,935
 Claims on credit institutions and central banks 373,300 1,314,318
 Loans and other debtors at amortised cost price 12,424,139 12,746,560
 Bonds at current value 3,783,258 2,755,912
 Shares etc. 229,541 249,054
 Capital shares in associated companies 543 538
  Other assets, including derivative financial instruments  299,721  360,822
  17,593,690 17,461,139
 Off-balance sheet items
Guarantees (contingent liabilities) 
1,667,100 
1,052,222
  1,667,100 1,052,222
 Maximum credit exposure excluding unutilsed credit facilities 19,260,790 18,513,361
 Unutilised credit facilities 4,026,576 3,338,861
 Total maximum credit exposure 23,287,366 21,852,222

A more detailed division of the items »Loans and other outstanding debts at amortised cost price«,
»Guarantees« and »Unutilised credit facilities« are given below. There is also a classification covering
only the items »Loans made and other outstandings at amortised cost price« and »Guarantees«.
* The bank has made unused credit facilities to a total of DKK 4 billion available. Most of this sum comprises uncommitted credits in the legal sense, and the bank will be able to terminate them with immediate effect.

 

Loans, guarantees and unutilised credit facilities by sector
Loans and guarantees in percent, end of year,
  classified by sector/business
 
End Dec. 2012 End Dec. 2011
Per cent Per cent
 
Public authorities 0.1 0.0
Business
Agriculture, hunting and forestry
Cattle farming etc. 2.8 3.2
Pig farming etc. 2.5 2.8
Other agriculture, hunting and forestry 4.2 4.6
Fishing 1.6 1.5
Mink production 1.2 1.2
Industry and raw materials extraction 2.1 2.9
Energy supply - Demnark 6.0 6.8
Energy supply - foreign 13.0 12.6
Building and construction 1.5 1.6
Trade 4.3 4.7
Transport, hotels and restaurants 1.4 1.9
Information and communication 0.2 0.2
Financing and insurance 10.7 7.3
Real estate 10.2 10.1
Other business 9.8 8.0
Total business 71.5 69.4
Private 28.4 30.6
Total 100.0 100.0
 

Note no.  End Dec. 2012
Per cent End Dec. 2011
Per cent
38 Credit risk - continued  
 Loans and guarantees by sectors
Loans and guarantees in percent, end of year,
by sector/business  
 Public authorities 0.0 0.0
 Business
Agriculture, hunting and forestry
Cattle farming etc. 

3.0 

3.5
 Pig farming etc. 2.6 2.9
 Other agriculture, hunting and forestry 4.2 4.4
 Fishing 1.8 1.7
 Mink production 1.1 1.3
 Industry and raw materials extraction 2.0 2.9
 Energy supply - Demnark 6.8 7.6
 Energy supply - foreign 14.7 14.2
 Building and construction 1.3 1.5
 Trade 3.6 3.9
 Transport, hotels and restaurants 1.5 2.1
 Information and communication 0.1 0.2
 Financing and insurance 11.7 7.0
 Real estate 12.2 11.4
 Other business 7.8 7.3
 Total business 74.4 71.9
 Private 25.6 28.1
 Total 100.0 100.0

The classification by business was made on the basis of Statistics Denmark’s sector codes etc.

Comments on distribution by business
In historical terms, Ringkjøbing Landbobank has always been run on the basis of a conservative
credit policy. In the bank’s judgment, this is reflected in the quality of the bank’s loans, which
is generally judged to be high. Solvency among the bank’s customers is generally good, and
in combination with the bank’s robust covering of many commitments, the result is low credit
risks.
Private customers comprise a total of 25.6% of Ringkjøbing Landbobank’s total loans and guarantees. Most of these customers are in the bank’s core area in central and western Jutland, and the quality of their credit is good. This good quality is attributable among other things to
a moderately negative trend in the prices of real estate and a lower proportion of income spent on housing - lower than in eastern Jutland and the capital city area. The primary security given by private customers consists of security in real estate (private homes).
The bank has a well-diversified agricultural portfolio with 2.6% of total loans and guarantees on
pig farmers, 3.0% on cattle and 4.2% on others.
The economic conditions for agriculture as a whole remain difficult, and although the bank’s farming customers have relatively less debt than the agricultural sector as a whole, it is a difficult situation. Some segments have, however, experienced improved terms of trade in 2012 relative to the previous years.
In general, earnings in agriculture are, however, still weak, and the bank has set aside consider- able provisions for this sector.
 

Note no.

38 Credit risk - continued

The security consists primarily of mortgages in the farms (land, buildings and the other produc- tion equipment) plus transfer of hectare support and other payments etc.
Loans to energy supply companies total 21.5%. This is thus the sector with the greatest propor- tion of the bank’s loans. Most of the exposure in this sector is on the financing of wind turbines, which has been a core area in the bank for more than 20 years. Exposure to energy supply companies abroad is mostly to wind turbines erected in Germany.
The bank’s concept for financing wind turbines is based on senior financing. The concept includes a legal and commercial due diligence, which provides a high degree of security. Fixed payment prices on the German market provide additional security that the bank can be repaid. The losses suffered by the bank in this sector have been minimal, and the financial crisis has confirmed that the risk in this sector is limited. Security is primarily provided by a first preferred mortgage in the turbines and transfer of electricity payments and any subsidies.
Real estate accounts for a total of 12.2% of the bank’s total loans and guarantees. This is a rela- tively modest proportion compared with other financial institutions, and this reflects the bank’s cautious approach to this sector. The loan and the security are mainly in the following groups:
•   Loans with first preferential security in the property (most of the loans)
•    Loans with second preferential security in the property and strong tenant with irrevocable     
lease.
In connection with other mortgage financing, the bank places weight on the project’s ability to
pay off the debt before termination of the lease.
Both types of loan have demonstrated their strength during the financial crisis, and the bank is
comfortable with them.
Financing and insurance account for a total of 11.7% of the bank’s total loans and guarantees, and cover, among other things, exposure to financially solid counterparties and the bank’s con- cept for lending on securities. The primary security under this concept consists of listed securi- ties. The concept has clearly demonstrated its strength in the particularly volatile periods on the financial markets occasioned by the financial crisis

Security
Ringkjøbing Landbobank wishes, to the greatest possible extent, to reduce the risk in connec- tion with business transactions entered into with the bank’s customers by taking security in the form of a mortgage in physical assets, securities, bank balances etc. and guarantees, sureties and letters of subordination. The most commonly used security is securities and cash, mortgage in real estate and chattels personal.
The bank monitors the value of securities which have been received. The bank takes a conserva- tive approach to assessing the loan value of security received. A deduction in the value is thus always made to cover the realisation risk, costs etc. The following table shows nominal secu-
rity values, i.e. the value of the nominal mortgage without any reduction. A reduction can be relevant if the actual value of an asset is insufficient to ensure the full value of a mortgage in the event of realisation.
 

 

 

2012

Nominal securities by sector and business for commitments which have not been written down
 
Securities
and cash Real estate Movable Total
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
 
Public authorities                                             0                    3,295                     1,800                5,095
Business:
Agriculture, forestry and fishing              286,334             1,282,299                 496,955         2,065,588
Industry and raw materials extraction       41,928                  66,839                 138,551            247,318
Energy supply                                        138,534                469,212              1,991,750         2,599,496
Building and construction                        10,041                  82,058                   95,606            187,705
Trade                                                        48,129                176,558                 165,773            390,460
Transport, hotels and restaurants                7,019                  64,838                 183,510            255,367
Information and communication                2,595                  22,144                     8,700              33,439
Financing and insurance                         748,291                336,507                   18,026         1,102,824
Real estate                                              117,238             1,250,680                   16,572         1,384,490
Other business                                       662,820             1,111,270                 122,499         1,896,589
Total business                                    2,062,929             4,862,405              3,237,942       10,163,276
Private                                                   939,739             2,793,760                 313,079         4,046,578
Total                                                   3,002,668             7,659,460              3,552,821       14,214,949

 

2011

Nominal securities by sector and business for commitments which have not been written down
Public authorities                                             0                    3,445                            0                3,445
Business:
Agriculture, forestry and fishing              271,178             1,263,812                 455,128         1,990,118
Industry and raw materials extraction       45,443                  75,814                 232,302            353,559
Energy supply                                          69,991                501,561              1,957,750         2,529,302
Building and construction                          9,780                104,304                 111,423            225,507
Trade                                                        56,909                204,426                 146,766            408,101
Transport, hotels and restaurants              68,165                  71,053                 182,959            322,177
Information and communication                2,767                  11,280                     5,213              19,260
Financing and insurance                         751,015                390,014                   19,196         1,160,225
Real estate                                              120,791             1,290,412                   22,424         1,433,627
Other business                                       460,337                592,821                 112,471         1,165,629
Total business                                    1,856,376             4,505,497              3,245,632         9,607,505
Private                                                   745,870             2,720,083                 268,890         3,734,843
Total                                                   2,602,246             7,229,025              3,514,522       13,345,793

The nominal collateral values are not necessarily indicative of the actual collateral value.
 

Note no.

38 Credit risk - continued

The credit quality of loans and guarantees which are neither in arrears nor have been writ-
ten down
The bank has credit ratings on a large number of customers. For private and small business customers, the rating is based on statistical models (based on the probability of default), while there is an expert model for major customers.
The statistical models include 7 - 10 different factors, including information on the customer’s assets and a quantity of behavioural data. These items are selected from a large number of pos- sible factors which best describe previously unsatisfied commitments.
The expert model for business customers is based on information on the customer’s creditwor- thiness and earning capacity. The model is a general model used for business as a whole. The model has three variants which are particularly to exposure to credit for wind turbines, agricul- ture and real estate.
As indicated in the figure below, 62% of loans and guarantees without write-downs or arrears have a high credit quality as against 57% in 2011. The proportion of customers with low credit quality increased from 7% to 12% via a reduction in the unclassified commitments, and the middle-ranking group was reduced. The year has thus seen a certain polarisation of customers without write-downs or arrears, but in general the bank finds the total quality stable.
Unclassified commitments amount to DKK 0.5 billion. These consist mainly of small business
customers and they cover a wide range of sectors.

Distribution of loans and guarantees without write-downs or arrears
70

60  2012  2011

50

40

30

20

10

0
High  Medium  Low  Not classified

Credit quality

Total loans and quarantees without write-downs or arrears (DKK 1,000)
2012 12,943
2011 11,578
 

 

Distribution by time from the due date for loans without write-downs in arrears
 
Under Over
90 days 90 days Total
DKK 1,000 DKK 1,000 DKK 1,000
 
Public authorities 47 0 47
Business:
Agriculture, forestry and fishing  14,193  1,259 15,452
Industry and raw materials extraction 1,761 108 1,869
Energy supply 3,666 11 3,677
Building and construction 1,078 656 1,734
Trade 3,756 622 4,378
Transport, hotels and restaurants 1,013 184 1,197
Information and communication 293 164 457
Financing and insurance 2,910 1,313 4,223
Real estate 2,306 4,005 6,311
Other business 10,515 1,222 11,737
Total business 41,491 9,544 51,035
Private 32,078 8,797 40,875
Total 2012 73,616 18,341 91,957
Total 2011 59,118 2,669 61,787
 

Note no.

38 Credit risk - continued

The value of loans where individual write-downs have been made

Major Total Individual
  financial  Breach  Relaxation  Probable credit write-
  difficulties     of contract  of terms  bankruptcy exposure downs
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
Credit exposure by reason for write-down
Public authorities 0 0 0 0 0 0

Business:
Agriculture, forestry and fishing   123,592  100,332  86,139  78,370  388,433 290,516
Industry and raw materials
extraction 16,475 2,157 323 2,851 21,806 15,640
Energy supply 0 2,311 0 0 2,311 1,018
Building and construction 12,221 5,447 16,790 0 34,458 21,420
Trade 8,410 8,461 1,355 2,647 20,873 14,391
Transport, hotels and restaurants   11,647 1,416 8,442 2,158 23,663 16,828
Information and communication 2 328 265 33 628 367
Financing and insurance 570 3,699 0 2,816 7,085 5,783
Real estate 24,362 32,258 31,285 2,662 90,567 45,989
Other business 25,015 15,089 8,824 8,690 57,618 47,082
Total business 222,294 171,498 153,423 100,227 647,442 459,034
Private 141,633 105,450 32,374 28,896 308,353 184,451
Total credit exposure 2012 363,927 276,948 185,797 129,123 955,795
Total credit exposure 2011 342,670 374,134 99,301 98,381 914,486

 

 

2012
 
Major
  financial  Breach  Relaxation  Probable-
  difficulties     of contract  of terms  bankruptcy Total
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
 
Individual write-downs 242,600 174,863 98,186 127,837 643,486
Security values for commitments
which have been written down 69,773 55,858 17,232 64,305 207,168
2011
Individual write-downs 219,842 224,671 78,541 59,336 582,390
Security values for commitments
which have been written down 63,604 71,807 25,139 24,158 184,708

The bank is particularly focused on covering the risk on commitments which have been written down. Under the bank’s credit policy, these commitments must be covered to the greatest possible extent
by securities. When determining the need for a write-down, the value of securities is included at the prudently expected net realisation value. The bank only includes the ability to make payments over and above the value of securities to a modest extent when determining the need for a write-down.
 

Loans and other debtors with an objective indication of impairment included in the balance sheet at a book value greater than zero
Individual written-down loans
Balance for loans and other debtors before write-downs 909,961 835,803
Write-downs -586,017 -503,289
Balance for loans and other debtors after write-downs 323,944 332,514
Group written-down loans
Balance for loans and other debtors before write-downs 11,908,553 12,143,747
Write-downs -114,876 -67,466
Balance for loans and other debtors after write-downs 11,793,677 12,076,281

Credit risk on derivative financial instruments
Positive market value (by counterpart risk) after netting
  Counterpart riskweight 20%  140,002  203,886
  Counterpart riskweight 75%  65,836  78,344
  Counterpart riskweight 100%  49,812  106,426
Total counterpart riskweight 255,650 388,656

39 Foreign exchange risk
Total assets in foreign currency 5,252,363 6,473,073
Total liabilities in foreign currency 3,119,494 3,189,031

Foreign exchange indicator 1 16,838 23,602
Foreign exchange indicator 1 in %
of core capital after deductions (%) 0.6 0.9

Foreign exchange indicator 2 212 586
Foreign exchange indicator 2 in %
of core capital after deductions (%) 0.0 0.0

40 Interest rate risk
Total interest rate risk 17,102 17,530
Total interest rate risk (%) 0.6 0.7
Interest rate risk by the foreign currencies:
DKK 18,710 17,097
NOK -2,453 -3,437
EUR 996 3,941
CHF -202 -261
USD 105 193
GBP -45 0
SEK 0 8
Other currencies -9 -11
Total 17,102 17,530
 

Note no.

41 Value at Risk/Market risk
Ringkjøbing Landbobank uses a Value at Risk (VaR) model as a sensitivity analysis for market risks. The model is a parametric VaR model based on a historic analysis of the covariation (the correlations) between the prices of various fi nancial assets etc. The model combines the histori- cal knowledge of the covariation on the fi nancial markets with the bank’s current positions, and on this basis calculates the risk of losses for a forthcoming ten-day period. The calculation includes the bank’s positions with respect to interest, foreign currencies and listed shares, while positions in sector shares and unlisted capital shares are not included. The calculated VaR thus
indicates the bank’s sensitivity to losses on the basis of its positions. The model is used as one of a number of tools in the bank’s management of market risks.
Reference is made to pages 26 - 27 of this annual report for further description of the model etc.

 
DKK million 

Average 

Minimum 

Maximum 

End of year
 Year/Risk VaR-figure VaR-figure* VaR-figure* VaR-figure
 2012
Interest 
15.0 
3.1 
28.9 
5.7
 Foreign currency 0.3 0.1 0.2 0.1

  Share
Diversifi cation  2.7
-3.3  2.6
-2.3  2.4
-3.1  2.2
-2.2
 Total VaR-figure 14.7 3.5 28.4 5.8

* Determined by the total VaR-fi gure.

Sensitivity analysis of sector shares (DKK 1,000)
 Sector shares cf. note 18 182,101
  Effect of a 10% price change on the result  18,210

Development in Value at Risk
25
Interest Foreign currency
20 Share Total

    15

   10

    5

0
 

42 Derivative financial instruments

By residual maturity
DKK 1,000 Over 3 month
Up to 3 month and up to 1 year
 
Nominal value Net market value 
Nominal value Net market value
Foreign-exchange contracts
Spot, purchase 
41,976 
99  
Spot, sale 23,902 -115  
Forward transactions/futures, purchase 1,041,877 3,662 178,436 -465
Forward transactions/futures, sale 3,531,774 6,096 175,165 14,410
Swaps
Options, purchase
Options, sale 46,396 35 99,732 188
Interest-rate contracts
Spot, purchase 
321,330 
791  
Spot, sale 110,704 -1,551  
Forward transactions/futures, purchase 6,822 63 5,000 149
Forward transactions/futures, sale 2,919 -19 88,176 -672
Swaps 51,065 -277 38,056 46
Options, purchase 5,521 47  
Options, sale 5,521 -47  
Share contracts
Spot, purchase 
46,054 
-264  
Spot, sale 47,816 310  
Forward transactions/futures, purchase 62 31  
Forward transactions/futures, sale 62 -31  
 

 

Foreign-exchange contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
 
Over 1 year
and up to 5 years Over 5 years
Net Net
Nominal market Nominal market
value value value value
 
Swaps 101,670 22,079 208,408 -514
Options, purchase
Options, sale
Interest-rate contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
Swaps 982,454 -31,582 513,357 18,979
Options, purchase 146,001 4,400 65,093 6,865
Options, sale 146,001 -4,400 65,093 -6,865
Other derivative contracts
Credit Default Swaps 74,606 -931
 

42 Derivative financial instruments - continued
DKK 1,000 Total net
Total nominal value market value

Foreign-exchange contracts 2012 2011 2012 2011
Spot, purchase 41,976 48,090 99 -27
Spot, sale 23,902 41,733 -115 -12
Forward transactions/futures, purchase 1,220,313 2,856,039 3,197 56,869
Forward transactions/futures, sale 3,706,939 6,666,368 20,506 13,824
Swaps
Options, purchase
Options, sale 456,206 500,694 21,788 16,698
Interest-rate contracts
Spot, purchase 
321,330 
214,579 
791 
712
Spot, sale 110,704 63,956 -1,551 -603
Forward transactions/futures, purchase 11,822 10,763 212 219
Forward transactions/futures, sale 91,095 33,022 -691 -360
Swaps 1,584,932 2,597,399 -12,834 3,886
Options, purchase 216,615 466,077 11,312 14,711
Options, sale 216,615 466,077 -11,312 -14,711
Share contracts
Spot, purchase 
46,054 
13,249 
-264 
702
Spot, sale 47,816 12,704 310 -708
Forward transactions/futures, purchase 62  31 
Forward transactions/futures, sale 32  -31 
Other derivative contracts
Credit Default Swaps 
74,606  
-931 
Net market value, total   30,517 91,200
 

42 Derivative financial instruments - continued
 

DKK 1,000

Foreign-exchange contracts
 

Market value Average market value
Positive Negative Positive Negative
2012 2011 2012 2011 2012 2011 2012 2011
 
Spot, purchase 119 63 20 90 203 323 2,932 4,329
Spot, sale 16 83 131 95 147 450 266 479
Forward transactions/
futures, purchase Forward transactions/ futures, sale 16,843

32,756 63,253

52,693 13,646

12,250 6,384

38,869 25,534

34,903 52,194

130,140 10,263

16,594 62,825

63,283
Swaps
Options, purchase
Options, sale 43,057 43,498 21,269 26,800 38,472 50,275 23,388 35,833
Interest-rate contracts
Spot, purchase 
1,823 
1,051 
1,032 
339 
1,043 
598 
1,129 
369
Spot, sale
Forward transactions/
futures, purchase 507

212 133

219 2,058 736 846

307 205

109 1,228

64 612

8
Forward transactions/
futures, sale 
528  
1,219 
360 
179 
25 
1,021 
340
Swaps 64,339 91,293 77,173 87,407 77,363 71,042 72,198 79,150
Options, purchase
Options, sale Share contracts Spot, purchase 11,312

211 14,711

774 
11,312

475 
14,711

72 14,130

769 13,558

1,145 
14,130

436 
13,558

396
Spot, sale
Forward transactions/
futures, purchase 499

31 82 189 790 451

35 395 746

48 3,889
Forward transactions/
futures, sale   
31  
12  
35 
Other derivative contracts
Credit Default Swaps   
931    
348 
Total 172,253  267,853  141,736  176,653  194,394  320,459  144,826  265,071
Provision of security under
CSA agreement 0 0  -86,101  -16,970
Total other shares/
other liabilities 172,253  267,853 55,635  159,683

All contracts of derivative financial instruments are non-guanteed contracts.
 

Summary DKK 1,000 2012 2011 2010 2009 2008

Profit and loss account

Interest receivable 834,021 858,257 836,339 993,756   1,221,165
Interest payable 200,764 245,291 241,954 377,728 669,149
Net income from interest 633,257 612,966 594,385 616,028 552,016
Dividend on capital shares etc. 1,463 1,111 1,219 3,243 1,491
Income from fees and commissions 210,516 158,303 170,389 149,628 176,118
Fees and commissions paid 24,029 24,312 25,996 23,823 28,464
Net income from interest and fees 821,207 748,068 739,997 745,076 701,161
Value adjustments +46,957 +16,386 +52,159 +58,130 -43,577
Other operating income 3,303 4,535 3,893 5,351 4,863
Staff and administration costs 252,796 244,068 236,374 235,604 236,056
Amortisations, depreciations and write-downs on intangible and
tangible assets 3,233 4,375 3,219 2,424 2,420
Other operating costs 133 381 195 56 86
Costs bank packages and
Deposit Guarantee Fund 10,281 11,178 46,590 55,785 16,148
Write-downs on loans an other debtors -156,844 -128,799 -138,217 -158,600 -77,223
Write-downs on national
bank package I etc. 0 0 -33,152 -51,173 -12,016
Result of capital shares in associated
companies +5 +11 +14 -59 -5
Profit before tax 448,185 380,199 338,316 304,856 318,493
Tax 120,188 94,128 81,443 72,775 78,495
Profit after tax 327,997 286,071 256,873 232,081 239,998
 

Summary DKK 1,000 End 20012 End 2011 End 2010 End 2009 End 2008

Balance sheet

Assets
Cash in hand and claims on credit
institutions and central banks 856,488 1,348,253 2,714,304 2,534,722 2,087,959
Loans and other debtors at
amortised cost price 12,424,139  12,746,560  13,151,216  13,047,212  13,897,101
Securities 4,013,342 3,005,504 1,804,062 1,936,663 1,553,741
Tangible assets 79,811 79,615 80,092 79,644 77,730
Other assets 307,766 369,091 497,530 329,715 385,222
Total assets 17,681,546  17,549,023  18,247,204  17,927,956  18,001,753

 

Liabilities and equity
Debt to credit institutions and central banks
Term to maturity under 1 year 294,208 285,028 636,326 699,732 2,077,112
Term to maturity over 1 year 903,863 957,047 1,995,864 2,294,991 3,224,050
Deposits and other debts 12,866,748  12,755,415  11,661,654  11,187,470 9,072,875
Issued bonds 340,809 338,958 337,617 557,337 478,341
Other liabilities 191,035 301,996 593,153 365,021 652,505
Provisions for liabilities 26,109 14,973 13,247 72,238 21,096
Subordinated debt 382,634 412,486 696,999 695,394 690,984
Share capital 24,700 25,200 25,200 25,200 25,200
Reserves 2,651,440 2,457,920 2,287,144 2,030,573 1,759,590
Total shareholders’ equity 2,276,140 2,483,120 2,312,344 2,055,773 1,784,790
Total liabilities and equity 17,681,546  17,549,023  18,247,204  17,927,956  18,001,753

 

Contingent liabilities etc.
Contingent liabilities 1,667,100 1,052,222 1,041,983 1,485,676 2,386,213
Total contingent liabilities etc. 1,667,100 1,052,222 1,041,983 1,485,676 2,386,213
 

 

Solvency:
 
2012 2011 2010 2009 2008
 
Solvency ratio  %  22.4  21.4  22.4  20.2  16.3
Core capital ratio  %  20.9  19.8  18.6  16.6  13.0
Solvency requirement  %  8.0  8.0  8.0  8.0  8.0

Earnings:
Pre-tax return on equity  %  17.4  15.9  15.5  15.9  17.9
Return on equity after tax  %  12.7  11.9  11.8  12.1  13.5
Income/cost ratio DKK 2.06 1.98 1.74 1.61 1.93

Market risk:
Interest rate risk  %  0.6  0.7  0.1  0.6  1.2
Foreign exchange position  %  0.6  0.9  0.5  3.4  5.6
Foreign exchange risk  %  0.0  0.0  0.0  0.1  0.0

Liquidity risk:
Excess cover relative to statutory
liquidity requirements  %  185.5  140.5  231.8  205.6  139.1
Loans and write-downs thereon
relative to deposits  %  102.4  105.0  117.6  120.8  157.1

Credit risk:
Loans relative to shareholders’ equity 4.6 5.1 5.7 6.3 7.8
Growth in loans for the year  %  -2.5  -3.1  0.8  -6.1  -1.7
Total large exposures  %  27.2  11.8  0.0  0.0  12.1
Cumulative write-down percentage  %  5.1  4.5  3.8  3.1  2.1
Write-down percentage for the year  %  1.06  0.89  0.94  1.16  0.48
Proportion of debtors at reduced interest  %  0.8  0.4  0.4  0.4  0.1

Share return:
Profit for the year after tax per share*/***   DKK  1,340.1  1,146.6  1,019.3  921.0  933.8
Book value per share*/** DKK 11,049 10,055 9,193 8,172 7,382
Dividend per share* DKK 280 260 240 0 0
Share price relative to profit for
the year per share*/*** 11.5 10.1 14.2 13.2 6.6
Share price relative to book value per share*/** 1.39 1.15 1.58 1.49 0.84

* Calculated on the basis of a denomination of DKK 100 per share.
** Calculated on the basis of number of shares outstanding at the end of the year.
***   Calculated on the basis of the average number of shares. The average number of shares is calcu-
lated as a simple average of the shares at the beginning of the year and at the end of the year.
 

Definitions of the official key figures/ratios from the Danish Financial Supervisory Authority
Solvency ratio
Capital base after deductions in per cent of total risk weighted assets.
Core capital ratio
Core capital after deductions (incl. hybrid core capital) in per cent of total risk weighted assets.
Pre-tax return on equity
Profit before tax in per cent of average shareholders’ equity. The average shareholders’ equity is calculated as a
simple average of the shareholders’ equity at the beginning of the year and at the end of the year.
Return on equity after tax
Profit after tax in per cent of average shareholders’ equity. The average shareholders’ equity is calculated as a
simple average of the shareholders’ equity at the beginning of the year and at the end of the year.
Income/cost ratio
Net income from interest and fees, value adjustments, other operating income and result of capital shares in
associated companies in per cent of staff and administration costs, amortisation, depreciation and write-downs
on intangible and tangible assets, other operating costs and write-downs on loans and debtors etc.
Interest rate risk
Interest rate risk in per cent of core capital after deductions (incl. hybrid core capital).
Foreign exchange position
Foreign exchange indicator 1 in per cent of core capital after deductions (incl. hybrid core capital).
Foreign exchange risk
Foreign exchange indicator 2 in per cent of core capital after deductions (incl. hybrid core capital).
Excess coverage relative to statutory liquidity requirements
Cash in hand, demand deposits with the Danish National Bank, fully secured and liquid on-demand credit
balance in credit institutions and insurance companies, unencumbered certificates of deposit issued by the
Danish National Bank, secure readily negotiable listed unencumbered securities, loan framework in the Danish
National Bank against security in sector shares valid for the time being with 30 days notice of termination. The
total of all elements measured in percent relative to 10% of the reduced debt and guarantee liabilities.
Loans and write-downs thereon relative to deposits
Loans + write-downs thereon in per cent of deposits.
Loans relative to shareholders’ equity
Loans/shareholders’ equity.
Growth in loans for the year
Growth in loans from the beginning of the year to the end of the year, in per cent.
Total large exposures
The total sum of large exposures in per cent of the capital base after deductions.
Cumulative write-down percentage
Write-downs on loans and provisions for losses on guarantees in per cent of loans + write-downs on loans +
guarantees + provisions for losses for guarantees.
Write-down percentage for the year
Write-downs etc. for the year in per cent of loans + write-downs on loans + guarantees + provision for losses
on guarantees.
Proportion of debtors at reduced interest
Proportion of debtors at reduced interest before write-downs etc. in per cent of loans + write-downs on loans
+ guarantees + provision for losses on guarantees.
Profit for the year after tax per share*/***
Profit for the year after tax/average number of shares.
Book valve per share*/**
Shareholders’ equity/share capital excl. own shares.
Dividend per share*
Proposed dividend/share capital.
Share price relative to profit for the year per share*/***
Share price/profit for the year per share.
Share price relative to book value per share*/**
Share price/book value per share.
*/**/***: See page 80.
 

 
OTHER INFORMA TION

 

Page
84 Shareholders’ committee
85 Board of directors
87 Board of managers
88 Company information
89 Stock exchange announcements
89 Financial calendar
90 The bank’s branches etc.
 

Shareholders’ committee

Jens Møller Nielsen, manager, Ringkøbing, - born 1956 chairman of the shareholders’ committee
Else Kirkegaard Hansen, senior master, Ringkøbing, - born 1954 deputy chairman of the shareholders’ committee
Hejne F. Andersen, industrialist, Ringkøbing - born 1954
Jens Arnth-Jensen, manager, Holte - born 1948
Gert Asmussen, printer, Tarm - born 1950*
Inge Sandgrav Bak, financial manager, Ringkøbing - born 1960* Claus H. Christensen, farmer, Lem - born 1961
Claus Dalgaard, manager, Ringkøbing - born 1962
Per Dam, accountant, Ulfborg - born 1952
Ole K. Erlandsen, butcher, Herning - born 1962
Keld Hansen, grocer, Søndervig - born 1948*
Niels Ole Hansen, manager, Ringkøbing - born 1951
Tonny Hansen, college principal, Ringkøbing - born 1958
Leif Haubjerg, farmer, No - born 1959
Erik Jensen, manager, Skjern - born 1965
Niels Esper Kamp, farmer, Stadil - born 1957
Jens Lykke Kjeldsen, timber merchant, Ringkøbing - born 1950* Gravers Kjærgaard, farmer, Grønbjerg - born 1952*
Lars Møller, municipal chief executive, Holstebro - born 1957
Martin Krogh Pedersen, manager, Ringkøbing - born 1967* Ole Christian Pedersen, manager, Vostrup - born 1950
Kristian Skannerup, industrialist, Tim - born 1959
Jørgen Kolle Sørensen, car dealer, Hvide Sande - born 1970
Johan Chr. Øllgaard, industrialist, Stauning - born 1947
Anne-Marie Sannerum, operations manager, Billund - born 1968

* Member of the board of directors
 

Board of directors

Jens Lykke Kjeldsen, timber merchant, Ringkøbing, chairman of the board of directors - born 1950
Member of the board of directors since 1995
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2016
Other managerial activities - member of the board of management of:
A/S Henry Kjeldsen
A/S Miljøpark Vest
Aktieselskabet af 1. august 1989
Asta og Henry Kjeldsens Familiefond
Danbuy A.m.b.A.
Henry Kjeldsen, Ringkøbing Tømmerhandel A/S
VT Hallen A/S

Gravers Kjærgaard, farmer, Grønbjerg, deputy chairman of the board of directors - born 1952
Member of the board of directors since 2002
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2013
No other managerial activities

Gert Asmussen, printer, Tarm - born 1950
Member of the board of directors since 2002
Chairman of the bank’s auditing committee
End of current term of election to the board of directors: 2014
Other managerial activities - member of the board of management of:
A. Rasmussens Bogtrykkeri ApS
Gert Asmussen Holding A/S
Gullanders Bogtrykkeri A/S
Tarm Bogtryk A/S
Tarm Elværk Net A/S
Tarm Ugeblad ApS
TB Anlæg ApS

Keld Hansen, grocer, Søndervig - born 1948
Member of the board of directors since 2002
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2014
Other managerial activities - member of the board of management of:
A/S Miljøpark Vest
Beach Bowl A/S
Investeringsselskabet Søndervig ApS
Norddan-Søndervig ApS
Søndervig Ejendomsselskab ApS
Søndervig Holding ApS
Søndervig Supermarked ApS
 

Board of directors - continued

Inge Sandgrav Bak, financial manager, Ringkøbing - born 1960
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
Other managerial activities - member of the board of management of:
International A/S
Rindum ApS
JSB Composite (Zhuozhou) Co., Ltd.

Martin Krogh Pedersen, manager, Ringkøing - born 1967
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
Other managerial activities - member of the board of management of:
     K. P. Holding A/S and one 100% owned subsidiary
     Mhkp Holding ApS and three 100% owned subsidiary
     PF Management Holding ApS and two 100% owned subsidiary
Techo A/S
Vestjysk Udvikling A/S

Bo Bennedsgaard, IT consultant, Holstebro, elected by the employees - born 1972
Member of the board of directors since 2007
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
No other managerial activities

Gitte Elisa Sigersmunda Høgholm Vigsø, Sagsbehandler, Holstebro, elected by the employees -
born 1976
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
No other managerial activities
 

Board of managers

John Bull Fisker, CEO - born 1964
Member of the board of managers since 1999

On the board of directors of the following companies: Deputy chairman of Bankdata, Fredericia
Deputy chairman of BI Holding A/S, Copenhagen
Deputy chairman of BI Asset Management Fondsmæglerselskab A/S, Copenhagen
Member of the boards of directors of BankInvest Private Equity A/S, Copenhagen
Deputy chairman of Letpension A/S, Copenhagen
Member of the boards of directors of PRAS A/S, Copenhagen

Member of the customer board of: PFA Pension A/S, Copenhagen
 

Ringkjøbing Landbobank Aktieselskab
Torvet 1
DK-6950 Ringkøbing
Denmark

Founded: 1886

Phone: +45 9732 1166
Telefax: +45 9732 1800
E-mail: post@landbobanken.dk
Website: www.landbobanken.com

CVR-no.: 37 53 68 14
Bank registration number in Denmark: 7670
SWIFT/BIC: RINGDK22

Share capital
Ringkjøbing Landbobank’s share capital is DKK 24.7 million in 4,940,000 shares of DKK 5.

Ownership
Ringkjøbing Landbobank is owned by approx. 17.156  shareholders.

Major shareholders
Two shareholders have advised their holding of at least 5% of Ringkjøbing Landbobank’s
share capital:
ATP, Hellerup
Parvus Asset Management (UK) LLP
 

Stock exchange announcements 2012
Review of Ringkjøbing Landbobank’s announcements to NASDAQ OMX Copenhagen and others in 2012 in compliance with Section 27b of the Danish Securities Trading Act:

01 February 2012 Announcement of the anual accounts 2011
01 February 2012 Annual report 2011
01 February 2012 Annual general meeting
01 March 2012 Minutes of the annual generel meeting the 29 February 2012
25 April 2012 Quarterly report 1st quarter 2012
31 May 2012 Implementation of capital reduction
31 May 2012 Updated regulations
31 May 2012 Voting rights
08 August 2012 Interim report for the 1st half 2012
19 September 2012 Financial calender
24 October 2012 Quarterly report 1st-3rd quarter 2012

Announcements regarding insiders’ transactions with the Ringkjøbing Landbobank
share from executive employees and their closely related do not emerge from the above review.
All the announcements from the bank to NASDAQ OMX Copenhagen and others can be seen on the website: www.landbobanken.com.

 

 

 

FINANCIAL CALENDAR

Financial calendar 2013
The financial calendar for the upcoming publications is as follows:

30 January 2013 Announcement of the annual accounts for 2012
27 February 2013 General meeting
24 April 2013 Quarterly report, 1st quarter 2013
07 August 2013 Interim report 2013
23 October 2013 Quarterly report, 1st-3rd quarters 2013
 

Head office:
Ringkøbing

Branches:
Herning
Investcenter Herning Holstebro Investcenter Holte Hvide Sande
Lem Spjald Tarm Ulfborg Viborg Vildbjerg
 

 

 

John Bull Fisker
CEO

 

Jørn Nielsen
Assistant general manager

 

Sten Erlandsen
Head of treasury

 

Ole Bjerregaard Pedersen
Financial manager

 

Jørgen Højgaard
Foreign manager
 

 
Ringkjøbing Landbobank A/S Torvet 1
DK-6950 Ringkøbing
Denmark

Telephone
+45 9732 1166

Telefax
+45 9732 1800

E-mail post@landbobanken.dk

Web www.landbobanken.com

SWIFT RINGDK22

CVR-no.
37 53 68 14