ANNUAL REPORT 2013
CONTENTS
Page
2 Dear shareholder
3 Five year summary
3 Annual report - highlights
Management report:
6 Financial review
15 Capital structure
19 Risks and risk management
31 Corporate governance
38 Corporate social responsibility
42 The under-represented gender
44 Information on listed companies
Statement and reports:
48 Management’s statement
49 Auditors’ reports
Accounts:
54 Profit and loss account
54 Proposed distribution of profit
55 Core earnings
56 Balance sheet
58 Statement of shareholders’ equity
59 Capital adequacy computation
60 Cash flow statement
61 Accounting policies
65 Notes to the annual report
88 Five year main figures
90 Five year key figures
Other information:
94 Shareholders’ committee
95 Board of directors
101 General management
102 Company information
103 Stock exchange reports
103 Financial calendar
104 The bank’s branches etc.
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.«
2013 was a really good year for Ringkjøbing Landbobank. The profit before tax improved
to DKK 472 million, equivalent to an 18% return on the bank’s equity. The core earnings
increased by 12% to DKK 451 million, which is above the expected range reported at the
beginning of the year. This result was achieved on the basis of the best ever increase in
customer numbers, which led to an 11% increase in the bank’s loans and a 10% increase
in deposits.
This was another year in Denmark with very modest growth and a record low interest
level. However, during the year we saw increasing optimism in large areas of business and
among private customers, supporting our belief that general growth in the society will be
one percentage point higher in 2014. We expect, however, that we will remain in a period
of low growth rates.
The price of the bank’s shares in 2013 performed well, with an increase of 44% including
the dividend paid, and their market value is now DKK 5.7 billion. It is recommended to
the general meeting that the ordinary dividend be increased to DKK 15, that we pay an
extraordinary dividend of DKK 10 per share, and that we continue with a new buy-back
programme for up to 110,000 shares.
The bank’s rate of costs was unchanged at 32%, and we thus remain the most efficient
bank in Denmark in terms of costs per krone earned. We are pleased with this situation
because it makes us very competitive and makes our results highly robust, which benefits
all our stakeholders.
Robustness, competitiveness and a high level of expertise are key elements for the cus-
tomers by 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 20%, which should be
seen in relation to the statutory requirement of 8.9%. The high solvency and the bank’s
earnings mean that Ringkjøbing 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 are also a credit to our competent employees, who again
performed fantastically during the year. Their expertise, stability, loyalty and fighting spirit
are an unsurpassed combination.
We expect 2014 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 more
new customers. We expect core earnings in the range DKK 410 - 460 million, to which
must be added the result for 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)
Total core income
2013
844
2012
823
2011
767
2010
758
2009
753
Total costs and depreciations
-273
-265
-248
-240
-238
Core earnings before impairments
571
558
519
518
515
Impairment charge for loans etc.
-120
-157
-129
-138
-159
Core earnings
451
401
390
380
356
Result for portfolio
+23
+49
+1
+38
+56
Expenses for bank packages
-2
-2
-11
-80
-107
Profit before tax
472
448
380
338
305
Profit after tax
358
328
286
257
232
Shareholders’equity
2,901
2,676
2,483
2,312
2,056
Deposits
14,114
12,867
12,755
11,662
11,187
Loans
13,849
12,424
12,747
13,151
13,047
Balance sheet total
19,583
17,682
17,549
18,247
17,928
Guarantees
1,902
1,667
1,052
1,042
1,486
Key figures for the bank (per cent)
Return on equity before tax, beginning of year
18.1
18.5
16.9
16.5
17.1
Return on equity after tax, beginning of year
13.7
13.6
12.7
12.5
13.0
Rate of costs
32.4
32.2
32.4
31.6
31.6
Tier 1 capital ratio
19.2
20.9
19.8
18.6
16.6
Solvency ratio - Tier 2
20.0
22.4
21.4
22.4
20.2
Solvency requirement
8.9
8.0
8.0
8.0
8.0
Key figures per 5 DKK share (DKK)
Core earnings
94
83
79
75
71
Profit before tax
99
93
77
67
60
Profit after tax
75
68
58
51
46
Net asset value
607
553
503
459
408
Price, end of year
1,099
770
579
725
609
Dividend
25
14
13
12
0
ANNUAL REPORT - HIGHLIGHTS
• The core earnings show an increase of 12% to DKK 451 million, which is above the
upwardly adjusted interval
• Increase in profit before tax to DKK 472 million, which is equivalent to an 18%
return on equity at the beginning of the year
• The rate of costs was unchanged at 32 - still the lowest in the country
• Substantial increase in customer numbers creates 11% increase in loans and 10%
increase in deposits
• Continued good increase in customers in the Private Banking segment
• Submitting of an ordinary dividend of DKK 15 and an extraordinary dividend of DKK
10 because the buy-back programme was not fully utilised - equivalent to a total
dividend of DKK 121 million
• Proposed cancellation of 60,000 shares and establishment of new buy-back pro-
gramme for up to 110,000 shares - equivalent to DKK 129 million
• Core earnings in 2014 are expected to be in the range DKK 410 - 460 million
M ANAGEMENT REPORT
Page
6 Financial review
15 Capital structure
19 Risks and risk management
31 Corporate governance
38 Corporate social responsibility
42 The under-represented gender
44 Information on listed companies
Financial review
The core earnings show an increase of 12% to DKK 451 million, which is above the
upwardly adjusted interval.
The profit before tax improved by 5% to DKK 472 million, equivalent to an 18% return
on the bank’s equity, which is considered highly satisfactory.
Core income
The total core income was 3% higher, with an increase from DKK 823 million in 2012 to
DKK 844 million in 2013. The bank considers the increase from the 2012 level satisfac-
tory.
Core income
900
800
700
600
500
400
300
200
Net interest income was DKK 615 million in 2013, unchanged relative to 2012. Com-
pared to last year, the bank experienced a falling interest margin during 2013, which
was neutralised with respect to earnings by an increase in the average volume of loans
from 2012 to 2013. In addition, the level of interest rates in society in 2013 was lower
than in 2012, which resulted in a lower return on the bank’s securities portfolio and
liquid resources.
Fees, commissions and foreign exchange earnings amounted to net DKK 212 million
in 2013 against net DKK 199 million in 2012, an increase of 6%. Greater activity and
volumes within asset management and pensions and higher income from guarantee
commissions helped to strengthen earnings. On the other hand, compared with 2012,
there were no conversions during the year.
Net fees and commissions and foreign exchange income were derived as follows:
(Million DKK)
2013
2012
Securities trading
27
24
Asset management
80
71
Payment handling
19
18
Loan fees
4
12
Guarantee commissions
62
41
Other fees and commissions
7
20
Foreign exchange income
13
13
Total
212
199
Costs and depreciations
Total costs including depreciations on tangible assets were DKK 273 million in 2013
against DKK 265 million last year, an increase of 3%.
The basic development in the bank’s costs of staffing and administration was moder-
ate, with a total rate of increase of less than 1%, which reflects an increase in the bank’s
salary costs and a decrease in IT costs. Most of the cost increase was attributable to an
additional DKK 5 million for the insurance scheme under the Guarantee Fund for De-
positors and Investors.
Rate of costs
2004
44.1
2005
37.2
2006
34.2
2007
33.7
2008
32.4
2009
31.6
2010
31.6
2011
32.4
2012
32.2
2013
32.4
10 20 30 40 50
Percent
The rate of costs was unchanged relative to last year’s level and was computed at
32.4%, which continues to be the lowest in Denmark. A low rate of costs is especially
important in periods of difficult economic conditions as this provides a high level of
robustness in the bank’s results.
Impairment charges for loans
Impairment charges for loans amounted to DKK 120 million against DKK 157 million
last year. The level of impairment charges is falling relative to last year and is equivalent
to 0.8% of the total average loans, impairment charges, guarantees and provisions. The
bank’s customers still appear to be coping better with the weak economic conditions
than the average in Denmark.
The bank’s total account for impairment charges and provisions was DKK 853 million at
the end of the year, equivalent to 5.1% of total loans and guarantees. Actual losses and
write-offs on loans etc. continue to be low, and with deduction of the items “Interest on
the impaired part of loans” and “Receivables previously written-off”, the year’s actual
net losses were DKK 25 million. The account for impairment charges and provisions is
increased by net DKK 95 million during the year.
The portfolio of loans with suspended calculation of interest amounts to DKK 85 million,
equivalent to 0.5% of the bank’s total loans and guarantees at the end of the year.
Given the low growth in the Danish economy for a number of years, which is expected
to continue this year, the bank is satisfied with the conservative credit policy on the
basis of which the bank is operated. As a natural part of the economic cycle, the bank’s
losses are expected to remain at a relatively high level in 2014, but at a lower level than
in 2013. It is also still the bank’s judgment that its credit policy, diversified loans port-
folio 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)
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
Total core income
844
823
767
758
753
735
696
609
511
417
Total costs etc.
-273
-265
-248
-240
-238
-239
-234
-208
-190
-184
Core earnings before
impairments
571
558
519
518
515
496
462
401
321
233
Impairment charges
for loans
-120
-157
-129
-138
-159
-77
+11
+69
+5
+4
Core earnings
451
401
390
380
356
419
473
470
326
237
The core earnings were DKK 451 million against DKK 401 million last year, an increase
of 12%. The core earnings were thus realised above the upwardly adjusted interval.
Result for the portfolio and market risk
The result for the portfolio for 2013 was positive at DKK 23 million including funding costs.
The bank’s holding of shares etc. amounted to DKK 209 million at the end of the year,
with DKK 16 million in listed shares and DKK 193 million in sector shares etc. The bond
portfolio is DKK 4,670 million, and the majority of the portfolio consists of AAA-rated Dan-
ish mortgage credit bonds and short-term bank bonds issude by rated counterparties.
The total interest rate risk, computed as the impact on the result of a one percentage
point change in the interest level, was 0.6% of the bank’s tier 1 capital after deductions
at the end of the year.
The bank’s total market risk within exposures to interest rate risk, listed shares and foreign
currency remains at a low level. The bank’s risk of losses calculated on the basis of a Value-at-
risk model (computed with a 10-day horizon and 99% probability) was as follows in 2013:
Value at Risk
Risk relative to equity
Risk in million DKK
end of year in %
Highest risk of loss:
26.0
0.90%
Lowest risk of loss:
2.5
0.09%
Average risk of loss:
14.9
0.51%
The bank’s policy remains to hold the market risk at a low level.
Profit after tax
The profit before tax was DKK 472 million. The profit after tax of DKK 114 million was
DKK 358 million against last year’s DKK 328 million. The profit before and after tax is
equivalent to a return on equity at the beginning of the year after payment of dividend
of 18% and 14% respectively.
Balance sheet
The bank’s balance sheet total at the end of the year was DKK 19,583 million against
last year’s DKK 17,682 million.
Deposits increased by 10% from DKK 12,867 million at the end of 2012 to DKK 14,114
million at the end of 2013.
The bank’s loans increased by 11% from DKK 12,424 million to DKK 13,849 million at
the end of the year. Just over half of the growth in the bank’s loans derives from wind
turbine financing, while the remainder derives from a broad range of industries with
growth from both other niches and the branch network. The bank thus in 2013 met its
goal of realising growth in loans via the organic growth strategy.
The bank’s portfolio of guarantees at the end of the year was DKK 1,902 million against
DKK 1,667 million in 2012.
Loans, deposits and shareholders equity
18,.000
16,.000
14,.000
L
o
a
n
s
D
e
p
o
s
i
t
s
Shareholders
equity
12,.000
10,.000
8,.000
6,.000
4,.000
2,.000
0
Liquidity
The bank’s liquidity is good, and the excess liquidity relative to the statutory require-
ment is 166%. The bank’s short-term funding with term to maturity of less than 12
months amounts to only DKK 755 million, corresponding to DKK 5.0 billion in short-
term money market placings, primarily in Danish banks and liquid securities. The bank is
thus not dependent on the short-term money market.
During 2013, the bank entered into long-term funding agreements with its partners to
the equivalent value of a total of DKK 1.1 billion with an average term of 5.1 years.
The bank’s deposits were DKK 265 million greater than loans at the end of the year, and
the loans portfolio is thus more than fully financed by the bank’s deposits and equity. In
addition, part of the German loans portfolio for wind turbines was refinanced back-to-
back with KfW Bankengruppe, and DKK 969 million can thus be disregarded in terms of
liquidity.
The bank thus requires no financing for the coming year to meet the minimum require-
ment that it must always be able to manage for up to 12 months without access to the
financial markets.
Liquidity buffer - 36 months
4.,500
4,.000
3,.500
3,.000
2.,500
2,.000
1.,500
1,.000
Rating
Ringkjøbing Landbobank was rated for the first time by the international credit rating
bureau Moody’s Investors Service in May 2007. The bank's ratings were the end of 2013
as follows:
Moody’s ratings:
Financial strenght
Long-term liquidity
Outlook
End 2013
C -
Baa1
Stable
The bank’s ratings have not been changed during 2013, and the bank thus still has the
best stand-alone rating among Danish banks rated by Moody’s Investor Service.
The supervisory diamond for banks
The Danish Financial Supervisory Authority has prepared a set of rules with five different
limit values/landmarks with which Danish banks must comply.
The bank’s key figures and the Danish Financial Supervisory Authorities’s limit values
are given in the table below. Ringkjøbing Landbobank complies with all five limit values
with a good margin.
The supervisory diamond
Limmit values The
bank’s key figures end 2013
Stable funding (funding ratio) < 1 0.7
Excess liquidity > 50% 166.2%
Total large exposures < 125% 35.0%
Growth in loans < 20% 11.5%
Real estate exposure < 25% 11.4%
Dividend and share buy-back programme
The bank’s board of directors will submit to the general meeting that an ordinary divi-
dend of DKK 15 per share, equivalent to DKK 73 million, be paid for the 2013 financial
year. A dividend of DKK 14 per share was paid in the 2012 financial year.
It is also submitted that an extraordinary dividend of DKK 10 per share be paid as the
share buy-back programme for up to 130,000 shares, which, at the price at the end of
January 2013 would be able to reduce the equity by up to DKK 105 million, was not
fully used in 2013. 60,000 shares were bought back in 2013 at a cost of DKK 59 million.
It is thus proposed that the remaining DKK 46 million be distributed as an extraordinary
dividend.
The recommendation to the general meeting will be that these 60,000 shares be can-
celled in connection with a capital reduction, thus reducing the number of shares in the
bank from 4,840,000 to 4,780,000.
It will also be proposed to the general meeting that a share new buy-back programme
be established under which up to 110,000 shares can be bought for cancellation at a
future general meeting. At the current price, this authorisation will reduce the equity by
DKK 129 million.
Capital
The equity at the beginning of 2013 was DKK 2,676 million. To this must be added the
profit for the year, and the dividend paid and the value of the own shares bought must
be subtracted, after which the equity at the end of the year was DKK 2,901 million, an
increase of 8%.
The bank’s solvency ratio (Tier 2) was computed at 20.0% at the end of 2013 and the
tier 1 capital ratio was computed at 19.2%.
Solvency cover
Core tier 1 capital ratio
2013
2012
2011
2010
2009
(excl. hybrid core capital) (%)
18.7
19.6
18.3
17.1
15.1
Tier 1 capital ratio (%)
19.2
20.9
19.8
18.6
16.6
Solvency ratio - Tier 2 (%)
20.0
22.4
21.4
22.4
20.2
Individual solvency requirement (%)
8.9
8.0
8.0
8.0
8.0
Solvency cover
225%
280%
268%
280%
253%
The above capitalisation means that Ringkjøbing Landbobank remains one of Denmark’s
best capitalised banks.
With effect from 2013, the method of calculation of the individual solvency requirement
was changed to the so-called 8+ model, where the calculation of the individual solvency
requirement is based on 8% plus any supplements calculated inter alia for customers
with financial problems.
In contrast to the previously used method, the 8+ model takes no account of the bank’s
earnings and cost base and its robust business model. Despite this, the bank’s individual
solvency requirement at the end of 2013 was calculated at only 8.9%.
A calculation of the consequences of implementing the CRD IV rules with effect from
the beginning of 2014 was made on the basis of the bank’s capital ratios at the end of
2013. The calculation shows a modest effect on the bank’s core tier 1 capital ratio (ex-
cluding hybrid core capital) and a reduction in the tier 1 capital ratio and the solvency
ratio of the order of 1.5 - 2.0 percentage points.
The bank’s shares
The bank’s share capital at the end of 2013 was DKK 24.2 million in 4,840,000 nom.
DKK 5 shares.
The bank’s shares at the beginning of the year were listed on the NASDAQ OMX
Copenhagen at a price of 770.
During 2013, the share price increased to 1,099 at the end of the year.
Share price
1,.200
1,.000
800
600
400
200
Dividend in 0 0 0
DKK per share
of nom. DKK 5
9 25 28
30 30 0
0 12 13
14 25
An investment in the bank's shares at the beginning of 2001 has including dividends
paid increased to be well thirteen times the worth at the end of 2013.
Good increase in customer numbers
Throughout 2013, the bank carried out various outreach initiatives towards both existing and
new customers, including by investing in further disseminating the bank’s Private Banking
platform at national level and by carrying out outreach activities in the branch network in
Central and West Jutland.
The activities were performed to create healthy growth in the bank as the biggest challenge
in a time of low growth in the society is to create growth in the bank’s top line.
The outreach activities in question contributed inter alia to the bank’s recording the best ever
net increase in customers during 2013, with growth in both the branch network and within
the niche concepts. The outreach initiatives are planned to continue in 2014 at both regional
and national levels.
Expected result and plans for 2014
The bank’s core earnings in 2013 were DKK 451 million, which is above the upwardly
adjusted range.
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 sound 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 2014, the bank expects
a continuing positive inflow of customers to its branches in central and western Jutland
because of its long-term outreach marketing of the bank and consolidation in the sector.
The activities in the bank’s Distance Customer Department and its niche concepts are
also expected to continue to develop positively as a whole in the coming year. Focus
will be placed on serving the bank’s current customers and further developing the port-
folio within wind turbine financing and medical practitioners.
Ringkjøbing Landbobank is establishing a new Private Banking branch in Aarhus in the
first quarter of 2014. The branch is being established following the success achieved by
the Private Banking branches in Ringkøbing, Herning and Holte over the last three years.
Given the possibilities which the bank currently sees in the market and the establish-
ment of a Private Banking branch in Aarhus in the first quarter of 2014, the bank
expects increased costs in the 2014 financial year of approximately 6%. The bank’s
impairment charges are still expected to remain at a relatively high level in 2014, but at
a lower level than in 2013.
As a whole, core earnings in 2014 are expected to be in the range DKK 410 - 460 mil-
lion. To this must be added the result for the bank’s result for portfolio.
Events after the end of the financial year
From the date of the balance sheet to today, no circumstances have arisen to change
the assessment of the bank’s annual report.
CAPIT AL STRUCTURE
Profit distribution
The bank’s board of directors recommends to the general meeting that a dividend of
DKK 15 per share, equivalent to DKK 73 million, be paid for the 2013 financial year. A
dividend of DKK 14 per share was paid regarding 2012.
The bank’s general meeting in February 2013 authorised the bank’s management to
implement a buy-back programme for up to 130,000 shares on the basis of the 2012
profit corresponding to DKK 105 million.
The bank has during 2013 bought back 60,000 shares and set them aside for later
cancellation. The cost of buying the shares totalled DKK 59 million, after which DKK 46
million of the DKK 105 million remains. The board of directors furthermore proposes to
the general meeting an extraordinary dividend of DKK 10 per share, equivalent to the
above remaining amount concerning the buy-back programme.
A total dividend of DKK 25 per share including the extraordinary dividend of DKK 10
per share is thus recommended to the general meeting.
A new buy-back programme is also proposed for up to 110,000 shares for cancella-
tion at a future general meeting. At the current price, this authorisation will reduce the
equity by DKK 129 million. It is also proposed that the board of directors be authorised
to cancel or reduce the buy-back programme if this is considered commercially appro-
priate for the bank, in the bank’s long-term interest, or the bank’s circumstances with
respect to capital otherwise so require.
It is finally recommended to the general meeting to cancel the above 60,000 shares
which were bought back and set aside, thus reducing the number of shares from
4,840,000 to 4,780,000 by a capital reduction.
Capital objective
During 2013, the bank’s management discussed the future objective for the bank’s
capital.
In management’s general assessment, the bank’s strong capitalisation in recent years
contributed inter alia to securing funding for the bank from private as well as institu-
tional investors, and management also believes that the strong capitalisation as a whole
contributed to the bank’s operating results.
The introduction of the CRD IV rules, which are discussed below, means more rigorous
requirements concerning the capital structure of banks. The bank is already complying
with the fully phased capital requirements at the beginning of 2014.
The bank’s management wants the bank to be capitalised in such a way that it has suf-
ficient capital for future growth, and there must also be sufficient capital to cover any
fluctuations in the risks assumed by the bank.
Given these general objectives, the management assesses that a long-term capital target
of approximately 15% for the bank’s core tier 1 capital is sufficient and adequate for the
bank.
The long-term capital target will be met by continuing the policy for distributions
practiced in recent years. The policy is characterised by stable dividends combined with
share buy-backs/extraordinary dividends to regularly adjust the capital structure relative
to the development in the bank’s risk-weighted assets and the bank’s future growth op-
portunities as envisaged by the bank’s management.
The summary below shows the actual distributions in per cent in recent years. The
summary lists the percentages distributed for the 2009 - 2012 financial years and the
expected percentage for 2013.
Distributions*
(Million DKK)
2013
2012
2011
2010
2009
Profit for the year after tax
357.7
328.0
286.1
256.9
232.1
Distributions
Ordinary dividend
72.6
69.2
65.5
60.5
0.0
Extraordinary dividend
0.0
48.4**
0.0
0.0
0.0
Buy-back programme
129.0
58.7
74.2
60.9
0.0
Total
201.6
176.3
139.7
121.4
0.0
Distribution in %
56 ***
54
49
47
0
* Percentages for the individual years were computed by dividing the actual distributions in one year by the profit for the year after tax.
Actual distributions were calculated as the proposed and subsequently paid dividend, any proposed and subsequently paid extraor-
dinary dividend and the actual cost of buying back the shares under an adopted share buy-back programme which were actually
cancelled, on the basis of the result for a given financial year.
** At the bank’s annual general meeting in February 2014, a proposal will be made for payment of extraordinary dividend relating to
the 2012 financial year, and the proposed extraordinary dividend is included in the percentage calculated for this financial year.
*** The percentage for 2013 is the proposed distribution. The percentage was thus calculated on the basis of the proposed ordinary
dividend and the current value of the proposed buy-back programme of 110,000 shares.
During 2013 the bank has realised an increase in the risk-weighted items of 12% pri-
marily caused by the growth in loans for the year. This has contributed to an adjustment
of the bank’s capital structure towards the long-term capital target as indicated in the
summary below.
Core tier 1 capital ratio
End dec. 2013 End dec. 2012
(excluding hybrid core capital) (%) 18.7 19.6
Long-term capital target, approximately (%) 15.0 15.0
Excess cover in percentage point 3.7 4.6
Change in excess cover during the year -20% (-0.9 percentage point)
The bank also expects to be able to create growth in the risk-weighted items in the
years to come through an increase in the bank`s loans.
Actual capital structure
The bank’s capital ratios as of the end of December 2013 were as follows:
Capital ratios
• Core tier 1 capital ratio (excl. hybrid core capital) 18.7%
• Tier 1 capital ratio 19.2%
• Solvency ratio - Tier 2 20.0%
With respect to the calculation of the bank’s core capital, capital base and core tier 1 capital ratio (excluding hybrid core capital),
tier 1 capital ratio and solvency ratio at the end of 2013, reference is made to the capital adequacy computation on page 59.
The above capitalisation ratios mean that Ringkjøbing Landbobank remains one of Den-
mark’s best capitalised banks.
Subordinate capital
The maturity structure of the bank’s external subordinated capital is presented in the
following overview.
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 Financial
Supervisory Authority.
• A total of nom. DKK 35.5 million of this had been bought at the end of 2013.
Capital adequacy rules
The bank uses the following methods for the calculation of risk-weighted items with
credit and counterparty risks and market and operational risks:
Calculation of capital adequacy - methods used
• 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 standardised method for calcu-
lation of its credit risk and therewith the risk-weighted items. This approach uses set
solvency weightings. The method thus means that the bank does not apply the same
down-weighting of solvency as those banks which apply one of the advanced methods.
On the other hand, the bank does not experience increasing solvency weightings in
periods of recession. Relative to the advanced methods, use of the standardised method
means that there is significantly greater robustness in the calculated capital percentages
and a smaller volatility in the risk-weighted items.
CRD IV rules
The capital requirements directive CRD IV and the capital requirements regulation CRR
represent the European implementation of the Basel III rules. In connection with the
implementation of the rules with effect from 2014 a gradual change concerning the
capital requirements imposed on businesses in the financial sector is initiated. The re-
quirements for when subordinated capital in the form of hybrid core capital and/or sub-
ordinated loan capital can be counted as the bank’s capital base will also be changed,
and an amortisation scheme will be introduced for the recognition of subordinated
capital obtained prior to the proposal for the CRD IV directive. Finally, certain changes
will be implemented for the calculation of risk-weighted items, including a temporary
discount on the exposure concerning certain small and medium-size enterprises (SMEs).
In conclusion, it should be noted that the European Banking Authority, EBA, is yet to
issue a number of interpretations inter alia on the capital requirements regulation, and
changes may thus be made throughout 2014 to the interpretations of the new rules
available at present.
The bank has made a calculation of the consequences of implementing the CRD IV rules
with effect from the beginning of 2014 was made on the basis of the bank’s capital
ratios at the end of 2013. The calculation shows a modest effect on the bank’s core tier
1 capital ratio (excluding hybrid core capital) and a reduction in the tier 1 capital ratio
and solvency ratio of the order of 1.5 - 2.0 percentage points.
Individual solvency requirement
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 calculation model and
calculated as the amount which is appropriate to cover the bank’s current and fu-
ture risks. With effect from 2013, the method of calculation of the individual solvency
requirement was changed to a so-called 8+ model, where the calculation of the capital
base adequacy is based on 8% plus any supplements calculated inter alia for customers
with financial problems. The computed adequate capital base is reassessed on a regular
basis, and reports to the Danish Financial Supervisory Authorities are also made on a
regular basis.
In contrast to the previously used method, the 8+ model takes no account of the bank’s
earnings and cost base and its robust business model. Despite this, the bank’s individual
solvency requirement at the end of December 2013 was calculated at only 8.9%. The
Danish Financial Supervisory Authorities most recently reviewed the bank’s statement
of its individual solvency requirement in autumn 2013. For further information on the
calculation of Ringkjøbing Landbobank’s individual solvency requirement, please see the
bank’s solvency requirement report for the fourth quarter of 2013 on the bank’s website
at the address: www.landbobanken.dk/solvency.
RISKS AND RISK MANAGEMENT
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 li-
abilities will change as a result of changes in market conditions. The bank’s total market
risk includes interest rate risks, foreign currency risks, share price risks and property risks.
The liquidity risk is defined as the risk that the bank’s obligations to make payments can-
not be honoured under the bank’s cash resources 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 of directors 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. The report covers the various
risks to which the bank is exposed, and gives the board of directors 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 policies 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 report-
ed to the bank’s general 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 provides 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 with respect to industries and geographical areas.
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 capital base (capital base after deductions) is
about five, 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 sound 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 business customers.
The statistical models use various factors, including information on the customer’s assets
and a quantity of behavioural data. The expert model for major 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 of the
bank’s loans which have not been impaired is generally unchanged relative to 2012.
The bank is, however, experiencing a deteriorating creditworthiness for some of the
bank’s loans to private customers, one reason being a weak real estate market. The bank
is paying attention to this and it is also generally aware of the risks posed to the bank’s
customers by the economic conditions. The bank gained many new customers through-
out 2013. When establishing new customer relationships, the bank is highly attentive to
the customers’ creditworthiness and potential risks. A separate review of new customers
in 2013 shows that these customers’ creditworthiness is better on average than the
bank’s portfolio in general. The bank’s many customers with high creditworthiness also
repay debts at a high rate. There is thus also a natural run-off of good loans, and the
overall result is a credit quality practically at the 2012 level, cf. note 36 on page 80.
Actual net losses
(In DKK 1,000) Loans with Impairments
Actual suspended for loans and Percentage Percentage
Actual net losses calculation provisions for Total loans and loss before loss
after
Year net losses after interest of interest guarantees guarantees etc. interest * interest *
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 14,849,602 -0.61% -0.33%
2013 -69,030 -25,117 85,258 853,421 16,604,640 -0.42% -0.15%
25-year average (1989 - 2013) -0.51% -0.01%
10-year average (2004 - 2013) -0.32% -0.13%
* Actual net losses relative to total loans, guarantees, impairments for loans and provisions for guarantees.
Explanation: The percentage losses are computed as the actual net losses for the year before and after the interest on the written down
portion of loans in percent of total loans, guarantees, impairments for loans and provisions for guarantees. A minus in front of a percen-
tage loss indicates a loss, while a positive percentage loss means that the interest on the written down portion of loans was greater than
the actual net losses for the year. All the above figures are computed excluding amounts concerning the national Bank Package I etc.
The above table documents the bank’s sound credit policy. As will be evident, the bank’s
average percentage loss after interest over the last 25 years (1989 - 2013) was -0.01%,
with -0.77% (1992) as the highest loss and +0.51% (2000) the most positive figure. The
average percentage loss before interest over the last 25 years is 0.51%, with -1.70 per-
cent (1992) the highest loss and -0.01% (1999 and 2000) the lowest loss. The average
percentage loss after interest over the recent ten years (2004 - 2013) was -0.13%, the
average percentage loss before interest was -0.32%.
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 areas within the bank’s niche section are financing of medical
practitioners’ purchases of private practices, a Private Banking concept covering affluent
private customers and financing of securities, loans for the financing of wind turbines
and selected wholesale loans. The financing of wind turbines is primarily for Danish
investors’ purchases of wind turbines erected in Denmark and Germany.
An important common factor in the niche loans 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.
Credit concentration
As indicated in the summary below, total large exposures amount to 35.0%. This figure
includes a good quality exposure of 18.2% with adequate security and a exposure with
a well-consolidated financial counterparty which will be redeemed in 2014.
Credit concentration
2013
2012
2011
2010
2009
Total large exposures
35.0%
27.2%
11.8%
0.0%
0.0%
Explanation: The Danish Financial Supervisory Authority key figure »Total large exposures«.
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.
10% 4%
28%
18%
11%
19%
7% 3%
Explanation: Distribution of the bank’s portfolio of loans and guarantees before impairments and provisions, based on the customers
address.
Credit risks on financial counterparties
Exposure to financial counterparties, and therewith a credit risk, including a settlement risk, aris-
es in connection with the bank’s trading in securities, foreign currency and derivative 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 has made and delivered.
The bank’s board of directors grants lines of credit for credit risks and settlement risks on finan-
cial counterparties. When granting lines of credit, account is taken of the individual counter-
party’s risk profile, rating, size and financial circumstances, and there is constant follow-up on
the lines of credit which were granted. The bank also mitigates its settlement risk concerning
clearing of foreign exchange via its membership in a clearing partnership (referred to as the CLS
partnership).
A requirement concerning clearing of derivatives (referred to as CCP) will be introduced gradu-
ally from 2014. The bank is participating to further mitigate the counterparty risk concerning
derivatives, and the bank also wants to be able to continue to offer competitive products to its
customers.
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.
Credit balances with central banks and credit institutions
One of the two major items concerning the credit risk with financial counterparties is credit
balances with central banks and credit institutions. The bank has assumed only a moderate risk
on this item, and out of the total claims on central banks and credit institutions, 51% is thus due
within three months.
The bond portfolio
The bank’s bond portfolio is the second of the two major items concerning the credit risk
against financial counterparties.
The bond portfolio consists mainly of AAA-rated Danish mortgage credit bonds and
bank bonds. There is also a modest holding of commercial bonds. The portfolio of bank
bonds consists mainly of bonds with short terms issued by rated banks. These bonds have
a good creditworthiness, but their market value can vary over time in connection with
general changes in credit spreads in the market, and company-specific circumstances can
also affect the value of these bonds. 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.
Bonds distributed by rating classes
A1/A+
11%
A3/A-
8%
Aaa/AAA
47%
B
a
a
1
/
B
B
B
+
1
5
%
B
a
a
2
/
B
B
B
2
%
B
a
a
3
/
B
B
B
-
1
%
Not rated
16%
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.
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 mathematical/statistical model to compute market risks. The model
is used to compute Value at Risk (VaR), which is regularly reported to the bank’s man-
agement.
VaR is a measure of risk which describes the bank’s risk under normal market conditions.
A separate 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 also has certain fixed interest financial assets
and liabilities, which 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 general management.
Interest rate risk
6
5
4
3
2
1
0
Explanation: The interest rate risk shows the impact on the result of a one percentage point change in the interest rate level as a
percentage of the tier 1 capital after deductions.
As will be evident from the figure, the bank has maintained a low interest rate 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 general management.
As in previous years, the bank’s foreign exchange risk in 2013 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, Letpension Holding A/S,
Nets Holding A/S, Swift, Bluegarden A/S, Værdipapircentralen A/S, Bankernes Kontant-
service A/S and Landbrugets Finansieringsbank A/S.
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 price risk. The
bank also holds a small portfolio of listed shares etc.
The bank’s policy is to maintain a low share price 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 the general management and the board of directors
are performed by the service and support department.
The bank’s portfolio of listed shares amounted to DKK 16 million at the end of 2013
against DKK 29 million at the end of 2012. The portfolio of sector shares etc. at the end
of 2013 was DKK 193 million against DKK 184 million at the end of 2012.
As will be evident from the following figure, the bank’s exposure to shares (excluding
sector shares) as a percentage of the bank’s equity has been modest, therewith docu-
menting the bank’s goal of maintaining a low risk on share prices.
Share exposure
8
7
6
5
4
3
2
1
0
Explanation: The share price exposure is computed as the bank’s portfolio of shares (excluding sector shares) as a percentage of the
bank’s 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 and equity.
Value at Risk
The bank’s total VaR was DKK 5.2 million at the end of 2013. 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.
Value at Risk summary
(In DKK million)
Average
Min.
Max.
End of year
Risk
VaR figure
VaR figure*
VaR figure*
VaR figur
Interest
15.2
1.9
26.6
5.3
Foreign currency
0.2
0.1
0.3
0.6
Share
3.2
1.9
4.0
1.5
Diversification
-3.7
-1.4
-4.9
-2.2
Total VaR figure
14.9
2.5
26.0
5.2
* Based on the total VaR figure.
As indicated in the table, the bank’s total VaR throughout 2013 varied from DKK 2.5
million to DKK 26.0 million. The average VaR figure was DKK 14.9 million, a small in-
crease relative to last year.
Reference is made to note 39 on page 84 for the VaR figures for the years 2009 - 2013.
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 currency indi-
ces. 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 forthcom-
ing ten-day period. All of the bank’s interest rate positions, foreign currency positions
and listed share positions are included in the calculation, while positions in sector shares
etc. 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 via a range of sources, namely the bank’s depos-
its, 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 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 various European business partners. It should be noted that the bank’s funding
situation is not comprised such that the bank is dependent on the individual business
partners or other partners in a single country.
The bank entered into an agreement with BRFkredit in 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 se-
curity in real estate. The partnership is running satisfactyory and the bank has made use
of the possibility of procuring liquidity through issuing of SDO bonds for the first time in
2013. The bank sees this possibility as a supplementary source of funding for the bank
in the future.
Deposits and other
debts
Distribution of
funding
72%
Issued bonds - term to
maturity over 1 year
Other liabilities
1%
1%
5
%
17% 4%
De
bt to
credit
institu
tions -
term
to
maturi
ty over
1 year
Debt to
credit
institutions -
term to
Total capital base
maturity under 1 year
The short-term funding (term to maturity under 1 year):
(DKK 1,000)
Issued bonds - term to maturity under 1 year 3,727
Debt to credit institutions and central banks - term to maturity under 1 year 750,834
Total 754,561
Is covered as follows:
Cash in hand and claims at call on the Danish National Bank
63,064
Claims on credit institutions - term to maturity under 1 year
214,032
Listed bonds and listed shares at current value
4,685,432
Total
4,962,528
Excess cover
4,207,967
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 claims at call on the Danish National
Bank, short-term loan arrangements to other Danish banks, and the bank’s portfolio of
liquid securities. The excess liquidity cover at the end of 2013 thus was DKK 4.2 billion,
while the corresponding figure at the end of 2012 and 2011 were DKK 3.9 billion and
DKK 3.7 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, 2011 and 2013.
As a whole, the bank has entered into long-term funding agreements with its partners
during 2013 to the equivalent value of a total of DKK 1.1 billion with an average term of
5.1 year.
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’ approved net incomes, a sum is
quantified and added 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 previous 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 annual report, but for a full overview of the bank’s duty to provide informa-
tion, the reader is referred to the bank’s website: www.landbobanken.dk/risk-informa-
tion.
CORPORA TE GOVERNANCE
Statement on corporate governance
In accordance with Section 134 of the Executive Order on Financial Reports for Credit
Institutions and Investment Firms, etc., the following statutory statement has been
prepared for corporate governance in Ringkjøbing Landbobank. The statement is a sum-
mary of a complete account of management and corporate governance in Ringkjøbing
Landbobank which is available on the bank’s website at www.landbobanken.dk/cg.
Codes of management
As a listed financial institution and a member of the Danish Bankers’ Association, the
bank is covered by a number of codes. As a company listed on the NASDAQ OMX
Copenhagen, the bank is covered by the Recommendations on Corporate Governance
issued by the Committee for Corporate Governance, and as a member of the Danish
Bankers’ Association, the bank is covered by the “Recommendations for member com-
panies of the Danish Bankers’ Association”.
The corporate governance recommendations
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.
The Committee on Corporate Governance issued updated recommendations in May
2013. The number of recommendations was reduced from 79 to 47, and in its updating
of the recommendations, the Committee was particularly focused on companies’ value
creation, on the board of directors’ self-evaluation and its involvement in companies’
development.
When preparing the 2013 annual report, the bank’s board of directors and general
management has assessed the bank’s positions on the updated recommendations. The
bank’s management supports the efforts in the area of corporate governance, and the
bank’s board of directors and the general management have elected to adopt almost all
the recommendations in this area. In a small number of 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 43 of the 47 recommendations.
Recommendations for members companies of the Danish Bankers’ Associa-
tion
In the Danish Bankers’ Association’s recommendations, the Association recommends
that member companies consider all of the recommendations of the Committee for
Corporate Governance of 6 May 2013 under the “comply or explain” principle. The
Danish Bankers’ Association further recommends that the member companies follow the
Danish Bankers’ Association’s recommendations on auditing.
The bank follows the Association’s recommendation on deciding on all recommenda-
tions of the Committee for Corporate Governance, and the bank follows the recom-
mendation in the area of auditing, where the Association recommends that its member
companies be strongly focused on the role of the external auditor and the quality of the
latter’s work. Banks, savings banks and cooperative banks should, for example, require:
• that external auditors have undergone in-service training focused on the banking
sector, and
• that the composition of the team used by external auditors must include at least two
experienced auditors with supplementary areas of competencies.
The bank is strongly focused on the external auditors’ role and qualifications. It is agreed
in the bank’s partnership with external auditors that the team that will audit the bank
will always include at least two experienced auditors with experience in auditing banks.
Furthermore it is also agreed that the signing auditor(s) will be certified under applica-
ble rules.
The bank also knows that the firm elected by the general meeting to audit the bank has
an in-service training programme etc. targeted towards the financial sector.
On 22 November 2013, the Danish Bankers’ Association also published a new code
of management adopted by the Association, hereinafter called “the Danish Bankers’
Association’s code of management”. The object of the recommendations in the Associa-
tion’s code of management is that the Association’s member companies must actively
consider a number of managerial matters and that greater openness will be obtained
concerning the frameworks for management of the individual member companies. The
Danish Bankers’ Association has thus prepared a further ten recommendations as well as
the above two recommendations in connection with the code of management. The
additional ten recommendations together with the above two by the Danish Bankers’
Association therewith comprise the Association’s full code of management. Under the
“comply or explain” principle, the Association’s member companies must specify how
they view the Association’s code of management in connection with the presentation of
the annual report for the 2014 financial year. When presenting the 2014 annual report,
Ringkjøbing Landbobank will thus provide a specific and detailed account of its position
on the recommendations in the Danish Bankers’ Association’s code of management. It
is, however, noted that the bank has a positive attitude to the recommendations and
that it has already implemented, and is following, most of the new recommendations.
The financial reporting process
The board of directors, the general management and the audit committee regularly
ensure that the bank’s controls and risk management in connection with the financial
reporting process are functioning satisfactorily.
The process is arranged in order to ensure that the annual report is presented in accord-
ance with statutory requirements and that it is free of significant misstatement, whether
attributable to fraud or error.
The financial reporting process is further organised so that the bank’s annual report is
prepared by the bank’s accounts department in cooperation with the bank’s general
management and other relevant departments.
A general rule for the financial reporting process is that the bank’s general management
and the accounts department continuously monitor compliance with relevant legislation
and other regulations and provisions in connection with the financial reporting process,
and report regularly to the bank’s board of directors and the audit committee.
The internal controls and risk management systems in connection with the financial
reporting process are also structured with the following main elements:
• The accounts department has overall management of the process of financial reporting.
• The accounts department coordinates and obtains relevant information from
other departments for use in the preparation of accounts and it also reviews such
information.
• The accounts department assists external and internal auditing with information and
details in connection with the auditing of the annual accounts.
• The general management makes a thorough review of the draft annual report and
other reports.
• The audit committee and the board of directors review the draft annual report.
• The general management and the board of directors meet with the bank’s auditors.
The above also applies to the presentation of quarterly and interim reports with their
consequent changes and adaptations resulting from the absence of audit hereof.
An account is given below of the bank’s audit committee and the internal controls and
risk management process in connection with the financial reporting process.
The audit committee
The audit committee’s tasks include monitoring and checking accounting and auditing
matters and preparing the board of directors’ handling of accounting- and auditing-
related items.
The board of directors has appointed an independent board member (the chairman
of the audit committee) who possesses the requisite qualifications within accounting,
including the financial reporting process, internal controls and risk management etc.
Internal control and risk management systems
The board of directors and the general management have general responsibility for the
bank’s internal control and risk management systems in connection with the presenta-
tion of accounts.
Recognition and measurement
For the recognition and measurement of certain assets and liabilities, estimates are
required of how future events will affect the value of these assets and liabilities on the
balance sheet date. Estimates of significance for the presentation of accounts are made
among other ways by summarising impairment charges on impaired loans, current
values of unlisted financial instruments and provisions.
The estimates used are based on assumptions which management judges to be pru-
dent, but which by their nature are uncertain. In management’s assessment, assets and
liabilities provide a true and fair view of the financial position, and the control environ-
ment for the estimates made is satisfactory.
The control environment
The most important elements in the control environment are an appropriate organisa-
tion, including proper separation of functions and internal policies, routines and proce-
dures.
The board of directors, the general management and the other persons concerned with
the presentation of accounts is comprised such that relevant competencies concern-
ing risk management and assessment of internal controls is present and independently
functioning.
The appointed audit committee regularly monitors the adequacy of the bank’s internal
controls and assesses material risks in connection with the financial reporting process,
including the risk that fraud or errors could lead to material misstatement in the annual
report.
Risk assessment
A risk assessment of the information in the annual report is regularly made in order to
identify elements which carry increased risks because they are based on estimates and/
or generated via complex or manual processes.
The audit committee is regularly advised of the assessment of the bank’s risks, including
risks which affect the process of presentation of the accounts. At least once a year, the
audit committee, the board of directors and the general management decide whether
new internal controls should be implemented to counter identified risks. The audit
committee and the board of directors also reviews particularly risky areas at least once a
year, including the recognition and measurement of major assets and liabilities and any
changes in accounting policies.
Control activities
Control activities have been established, the object of which is to prevent, discover and
correct any errors and deficiencies in the data which form the basis for preparation of
the accounts.
These activities include certification, authorisation, approval, reconciliation, analyses of
results, separation of duties, general IT controls, and controls concerning IT applications.
Monitoring and reporting
The bank uses systems and manual resources to monitor the data on the basis of which
the accounts are prepared. Any weaknesses and errors are regularly corrected and re-
ported.
Further analyses and control activities are carried out in connection with the prepara-
tion of the accounts to ensure that the accounts are presented in accordance with legal
requirements. The audit committee follows up to ensure that the weaknesses in the in-
ternal controls and major errors and omissions in the annual financial statements noted
and reported by the internal and the external audit are corrected.
The bank’s management organs and their committees and functions
The bank’s management organs comprise the following bodies:
• The general meeting
• The shareholders’ committee
• The board of directors
• The general management
The bank advises as follows with respect to the individual organs’ functions:
Re The general meeting
The general meeting is the bank’s supreme decision-making authority. The general
meeting’s tasks include electing members to the bank’s shareholders’ committee.
Re The shareholders’ committee
In accordance with the articles of association, the bank’s shareholders’ committee has
at least 25 and at most 30 members elected for four years at a time. As of the end of
December 2013, 26 members had been elected to the bank’s shareholders’ committee.
The bank’s shareholders’ committee elects the members of the bank’s board of direc-
tors. The shareholders’ committee also has a duty to act in the bank’s best interest and,
to the best of its ability, to assist the board of directors and the general management
with the procuring of information they may need. The shareholders’ committee also sets
the fixed remuneration for the board of directors and decides on the establishment of
branches as recommended by the board of directors.
Members of the shareholders’ committee must retire from the committee at the latest at
the first annual general meeting after they have reached the age of 67.
Re The board of directors
In accordance with the articles of association, the bank’s board of directors consists of
at least four and at most six members elected by the shareholders’ committee. As of the
end of December 2013, the board of directors had six members elected by the share-
holders’ committee and two members elected by the employees.
The bank’s general management does not serve on the board of directors, but it par-
ticipates in board meetings. The board of directors holds 10 - 12 meetings a year. The
board of directors proposes members of the board such that its composition ensures
a range of competencies and is comprised in a manner which ensures a broad range
of competencies and compliance with a special competence profile specified by the
board itself. Board members are also elected for four-year terms. In accordance with the
recommendation of the Committee for Corporate Governance, at least half the board
members must be independent.
Members of the board of directors must retire at the latest at the first annual general
meeting after they have reached the age of 67.
Committees of the board of directors
The board of directors has appointed the following committees: an audit committee,
a risk committee, a nomination committee and a remuneration committee. The audit,
risk and nomination committees consist of the bank’s full board of directors, while the
remuneration committee consists of the chairman and deputy chairman of the board of
directors and one member elected by the employees. The audit committee held three
meetings in 2013. The risk and nomination committees were only formed at the end
of 2013, and the remuneration committee’s tasks during the 2013 financial year were
undertaken by the board of directors.
Further information on the committees of the board of directors is given on pages 97 -
99 of this annual report.
Evaluation of the board of directors etc.
The board of directors has for several years conducted a self-evaluation process, and
the board of directors in 2012 also supplemented the self-evaluation on the basis of
the Financial Supervisory Authorities’ guideline for evaluation of the board of directors’
knowledge and experience in credit institutions.
In autumn 2013 the board of directors again made its annual self-evaluation process
etc. As a basis for the evaluation, the board also identified the competencies 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 concept and a comprehensive analysis of the
risks associated therewith. The general competencies required includes knowledge of
the following matters:
• The business concept and various related matters
• Credit risks and various related matters
• Market risks and various related matters
• Liquidity risks and various related matters
• Operational risks and various related matters
• Other matters:
• Budgets, accounting and auditing
• Capital
• Insurance matters
• Risk management
• Managerial experience from other financial activities
• General managerial experience
• Legal insight, including in relation to financial legislation
Each individual board member assessed his or her own qualifications on the basis of the
specified requirements.
The board also evaluated its own work and working relationships.
The board discussed the result of the evaluations, and its assessment and conclusion is
that its work and working relationships are functioning satisfactorily and that its mem-
bers possess adequate collective knowledge, the professional skills and experience to
understand the bank’s activities and their associated risks, and that the number of board
members is appropriate relative to what is judged to be required for the bank.
Each member of the board of directors has also declared his judgment that he is fit and
proper under applicable rules, and that he or she possesses the necessary resources for
the job.
Remuneration policy
In 2012 the bank’s board of directors adopted a remuneration policy which was pre-
sented to the 2013 annual general meeting for approval. The meeting approved the
policy, which includes guidelines for the remuneration paid to Ringkjøbing Land-
bobank’s board of directors and general management. The policy for management is
that the bank’s management is paid remuneration which is both in line with the market
and reflects the management’s performance for the bank. It was also decided that the
fees paid to both the board of directors and the general management will be fixed such
that there are no incentive payments. Other risk takers and employees in control func-
tions will not be paid variable salary components outside the framework of the collective
agreement which was entered into. The board of directors has in 2013 made an annual
review of the policy and has found no reason to make changes.
Supplementary information on the members of management, including other
managerial offices
The reader is referred to pages 95 - 96 and 100 - 101 of this annual report for supple-
mentary information on the members of the bank’s management, including information
on their other managerial activities and on the competencies of the members of the
board of directors.
Re The general management
The general management undertakes the bank’s daily management.
Statement on corporate social responsibility
In accordance with Section 135 of the Executive Order on Financial Reports for Credit
Institutions and Investment Firms, etc., the following statutory statement on corporate
social responsibility has been prepared.
Corporate social responsibility policy
Ringkjøbing Landbobank’s corporate social responsibility (CSR) policy is based on the
bank’s long-standing roots in the local communities in which the bank is represented.
The bank has a desire to be a responsible and value-creating bank, and the bank works
to create the best results for its shareholders, customers, employees, the local commu-
nity and the surrounding environment.
It is also the bank’s goal to be seen as a solid and attentive partner among all its stake-
holders.
The bank’s CSR policy is divided to focus specifically on the four stakeholder groups:
customers, employees, the environment and the local community. The bank’s CSR
policy is available on the bank’s website at the address: www.landbobanken.dk/csr, and
furthermore this statement is also published at the same internet address.
It is advised further to the bank’s CSR policy that the bank has not prepared a specific
human rights policy or a specific policy for climate effects. The bank supports the efforts
by the Danish government to put human rights and climate effects high on the agenda,
but as a regional bank, the bank has currently not found it necessary to develop sepa-
rate policies for this.
The statement below on the bank’s activities in 2013 is targeted at the four stakeholder
groups.
Customers
During the year, the bank continued its work on development of its advisory service etc.
The work included:
• 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 insurance cover in the event of disablement and death.
• Development of the means of communication between the bank and its custom-
ers, including 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 strength of Private Banking advice, where the bank’s asset advisers provide spe-
cialised advice to customers with complex financial situations.
• Development and implementation of a payment solution via mobile phone - called
"Swipp".
Employees
The following was implemented in 2013 in relation to the bank’s employees:
• Performance reviews with all employees.
• Training and certification of advisers in financial products to ensure their provision of
competent advice. The training and certification were carried out to further upgrade
certain of the bank’s employees, and new employees completed the programme if
they had not already done so on the date of employment.
• Continued training within advice on pensions.
• In-service training for a large number of employees in provision of all-inclusive
advice.
• Employment of a total of 26 employees, including seven new financial economists
and trainees. With a view to recruiting financial economists and trainees next year,
the bank held two information evenings and visited the educational institutions in
the area in autumn 2013 to give the students in upper secondary programmes in the
bank’s local area information on a further education programme with the bank, thus
providing them with a basis on which to make a qualified career choice.
• Implementation of new routines and systems to increase the efficiency of the bank’s
administrative processes. This also includes continuation of an in-house 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 bet-
ter provision of advice to the bank’s customers.
• Supported social activities in the bank, including financial support for the bank’s staff
association.
In 2014, focus will be placed on inter alia the following in relation to the stakeholder
group “Employees”:
• Signing a new collective agreement
• Various training initiatives
• Establishment of a whistleblower scheme in accordance with applicable law
The environment
As a bank as well as a workplace, the bank accepts shared responsibility for the environ-
ment.
In 2013 this included the following concerning the banking activities:
• Loans for wind turbine financing
• Financing of other energy-saving initiatives
• 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:
• Continued focus on conversion of procedures to electronic case handling.
• All advisers have received bigger monitors. The new monitors are more energy-
efficient partly because their power consumption per hour is lower than the old ones
and partly because the new monitors switch to energy-saving mode when the user
leaves the workstation, thus also reducing power consumption.
• A large number of employees have had two monitors installed at the workplace,
which gives them the opportunity to structure their work better on the monitors.
This helps to reduce the amount of unnecessary printing.
• In addition to the above initiative of purchasing energy-saving computer monitors,
a power-saving campaign was carried out in which as many electrical appliances as
possible apart from the computer screens turn off automatically at the end of the
working day.
• Continued focus on holding video conferences to the extent possible with the bank’s
IT supplier, Bankdata, to reduce the employees’ travels to Bankdata’s departments
in Silkeborg and Fredericia, and continued focus on car-sharing for and planning of
training and meeting activities to reduce the associated travel as much as possible.
In all of the above initiatives, focus has been placed on reducing the bank’s environmen-
tal impact, including reduction of CO2 emissions, lower power and paper consumption
etc.
In 2014, the bank will focus on further reductions through the following initiatives:
• The bank will continue to focus on loans for renewable energy.
• It will become possible for the bank’s customers to sign agreements and documents
electronically by using the NemID login. Agreements and documents will thus be
delivered to the customer’s internet-based electronic mailbox to further reduce paper
consumption.
• It is planned to install video conference equipment in the bank’s branches to reduce
the requirement for driving associated with internal meetings in the bank.
Local community
Given its position in the local area, the bank has a natural wish to support the area’s
development. Activities in 2013 included the following:
• Total payment of DKK 114 million in corporation tax and payroll tax, of which DKK
100 million was corporation tax.
• Allocation of a total of just over DKK 0.8 million from the following:
• Sdr. Lem Andelskasses Fond
• Tarm Banks Jubilæumsfond
• The bank’s profit distribution
• Sponsorship agreements with more than 700 clubs and associations in the bank’s
local area. This includes sponsorships and subsidies for cultural activities, general and
elite sports in order to support the goal of putting the local community on the map.
Specific major activities during the year included support for:
• DGI gymnastic displays in the spring in Ringkøbing and Skjern
• DGI World Gymnastic Team in Skjern
• Gospel festival in Hvide Sande
• Ringkøbing-Skjern Municipality golf championships
• Artificial football turf in Ringkøbing
• Lem Hallen - sponsor contribution to rebuilding and extension
• New Year concert in Ringkøbing
• Ringkøbing Fiord Jazz Festival at Stauning harbour
• Shock Wave music festival in Hvide Sande in connection with the cultural festival
The Wave under the Cultural Collaboration in Mid- and West Jutland
• Skjern GF Football as the new main sponsor
• School football in Ringkøbing-Skjern Municipality
• Spjald FritidsCenter - sponsor contribution to expansion
• Wood sculpture festival in Ringkøbing
• And many more
The bank will also in 2014 continue to be an active support to the many clubs and as-
sociations in the bank's local area.
Statement on the under-represented gender
In accordance with Section 135a of the Executive Order on Financial Reports for Credit
Institutions and Investment Firms, etc., the following statutory statement has been
prepared.
In March 2013, the bank’s board of directors adopted a target figure for the percent-
age of the under-represented gender to be represented on the board of directors and
a policy aiming at increasing the percentage of the under-represented gender at the
bank’s other management levels.
Target figure for the percentage of the under-represented gender on the
board of directors
When the board of directors adopted the target figure in March 2013, the gender distri-
bution of board members elected by the shareholders’ committee was the following:
• 16% women
• 84% men
The target set by the board of directors is that the proportion of female board members
elected by the shareholders’ committee should minimum be 16% - 33% from 2017 (pro-
vided that the number of board members elected by the shareholders’ committee is 6).
The nomination process for the election to the board of directors in 2013 was over
when the board adopted the target figure, and at the end of December 2013 the gen-
der distribution of the bank’s board members elected by the shareholders’ committee
was unchanged in relation to March 2013.
The board of directors’ target figure has been adopted as a target applicable from 2017,
and in connection with future nomination processes for the election of board members,
the board will focus on achieving the target figure upon the shareholders’ committee.
Policy to increase the percentage of the under-represented gender at the
bank’s other management levels
In March 2013, the board of directors also adopted a policy aiming at increasing the
percentage of the under-represented gender at the bank’s other management levels.
The adopted policy aims at creating a basis for a more equal gender distribution at the
bank’s other management levels.
Other management levels (in the following called management) should be understood
as management positions not related to the board of directors, i.e. the general manage-
ment, department managers, branch directors and managers and team leaders.
It is the bank’s overall and long-term aim to provide a more equal gender distribution
at management level. The bank wants to be able to follow up on developments with
respect to gender distribution in management and to adjust the effort continually in
relation to the target.
The bank considers targets and target figures as tools when it comes to ensuring pro-
gress and obtaining results. The bank has set the following concrete targets and target
figures for the under-represented gender at the bank’s management:
• The employees must, irrespective of gender, feel that they have equal career and
management opportunities.
• The percentage of managers in the management from the under-represented gender
must be at least 20%.
• Focus must be placed on gradually increasing the current percentage of 25% from
now until 2017 of managers in the management from the under-represented gen-
der.
In order to reach the specified targets and target figures, the bank will implement initia-
tives in relevant areas. Such initiatives will, however, take into consideration the bank’s
wish to maintain and develop the current open-minded and unprejudiced culture in
which the individual employee can make the best possible use of his or her skills irre-
spective of gender, and the bank will thus always appoint the best qualified manager
irrespective of gender.
The bank also wants to continue the long-standing policy of Ringkjøbing Landbobank
according to which all employees are inspired to become part of the bank’s manage-
ment. Finally, the bank offers all employees the opportunity to develop their professional
and personal skills by participating in various training and personality development
activities. It is the aim of the bank that employees of both genders should generally
participate in these activities on an equal footing.
In March 2013 when the policy and the targets were adopted, the total number of
employees involved in management was 36, with the following gender distribution:
• 25 % women
• 75% men
From March 2013 to the end of December 2013 there were no changes in the number
of employees or the gender composition in the bank’s management, and the gender
distribution was thus unchanged. In connection with future recruiting processes for
management positions, the bank will take the above targets and additional comments
into consideration.
This statutory statement on the under-represented gender is also published on the
bank’s website at: www.landbobanken.dk/gender.
Information on listed companies
In accordance with Section 133a of the Executive Order on Financial Reports for Credit
Institutions and Investment Firms etc., the bank advise as follows:
The bank’s share capital on 31 December 2013 was DKK 24.2 million in 4,840,000 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, Denmark and Parvus Asset Management (UK) LLP, London, United King-
dom, have advised that they own more than 5% of the bank’s share capital.
With respect to the exercising of voting rights, each shareholding up to and including
nom. DKK 500 carries one vote. Shareholdings 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 shareholders or when the shareholder has
reported and documented his or her right.
The members of the bank’s board of directors are elected by the members of the bank’s
shareholders’ committee, and the bank’s employees also elect members to the bank’s
board of directors in accordance with rules in force.
With respect to amendments of the bank’s articles of association, a decision to change
these 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 represented at the general meeting.
On the date of presenting the financial statements, the board of directors has the
following authority pursuant to the articles of association to issue shares:
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
38,410,980 in one or more rounds. The existing authorisation is valid until 24 February
2018.
The board of directors has the following powers with respect to the possibility of
acquiring own shares:
The bank’s annual general meeting of 27 February 2013 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 the annual general meeting in 2013, the board was also authorised to buy back up to
130,000 shares and set them aside for later cancellation, and this authority was exer-
cised in 2013 for 60,000 shares.
ST A TEMENT AND REPORT S
Page
48 Management’s statement
49 Auditors’ reports
Statement by the board of directors and the general
management
The board of directors and the general management have today reviewed and approved the annual
report of Ringkjøbing Landbobank A/S for the financial year 1 January - 31 December 2013.
The annual report is prepared in accordance with the provisions of the Danish Financial Business Act
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 estimates
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 2013 and the result of the bank’s activities and cash
flows for the financial year 1 January - 31 December 2013. We also believe that the management 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, 29 January 2014
General management:
John Bull Fisker
CEO
Ringkøbing, 29 January 2014
Board of directors:
Jens Lykke Kjeldsen Martin Krogh Pedersen
Chairman Deputy Chairman
Gert Asmussen Inge Sandgrav Bak
Gravers Kjærgaard Jørgen Lund Pedersen
Bo Bennedsgaard Gitte E. S. Vigsø
Employee board member Employee board member
AUDITORS’ REPORTS
Internal auditor’s report
To the shareholders of Ringkjøbing Landbobank A/S
Endorsement 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 2013, covering the profit and loss account, core eranings, balance sheet,
statement of shareholders´ equity, capital adequacy computation, cash flow statement and notes,
including accounting policies and five year main and key figures. The annual financial statements were
prepared in accordance with the Danish Financial Business Act.
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.
My 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 2013 and of the result of the bank’s activities and
cash flows for the financial year 1 January - 31 December 2013 in accordance with the Danish act on
financial activities.
Statement on management report
As required under the Danish Financial Business Act, 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 accordance with the annual financial state-
ments.
Ringkøbing, 29 January 2014
Henrik Haugaard
Chief auditor
The independent auditor’s report
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 2013, covering the profit and loss account, core earnings, balance sheet,
statement of shareholders´ equity, capital adequacy computation, cash flow statement and notes, in-
cluding the accounting policy and five year main and key figures. The annual financial statements were
prepared in accordance with the Danish Financial Business Act.
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 Danish Financial Business Act. Management is also responsible for
the internal controls deemed necessary to prepare annual financial statements without material mis-
statements, 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.
The independent auditor’s report - continued
Conclusion
We 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 2013 and of the result of the bank’s activities and
cash flows for the financial year 1 January-31 December 2013 in accordance with the Danish Financial
Business Act.
Statement on the management report
In accordance with the Danish Financial Business Act, 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, 29 January 2014
PricewaterhouseCoopers
State-authorised partnership
H. C. Krogh
State-authorised
public accountant
ACCOUNT S
Page
54 Profit and loss account
54 Proposed distribution of profit
55 Core earnings
56 Balance sheet
58 Statement of shareholders’ equity
59 Capital adequacy computation
60 Cash flow statement
61 Accounting policies
65 Notes to the annual report
88 Five year main figures
90 Five year key figures
Note
no.
2013
DKK 1,000
2012
DKK 1,000
1
Interest receivable
776,268
834,021
2
Interest payable
146,037
200,764
Net income from interest
630,231
633,257
3
Dividend on capital shares etc.
12,610
1,463
4
Income from fees and commissions
229,813
210,516
4
Fees and commissions paid
31,123
24,029
Net income from interest and fees
841,531
821,207
5
Value adjustments
+23,074
+46,957
Other operating income
2,730
3,303
6,7,8,9
Staff and administration costs
254,909
252,796
10
Amortisations, depreciations and write-downs on
intangible and tangible assets
4,270
3,233
Other operating costs
Miscellaneous other operating costs
28
133
Costs Deposit Guarantee Fund
16,091
10,281
11
Impairment charges for loans and other debtors etc.
-120,175
-156,844
Result of capital shares in associated companies
-3
+5
Profit before tax
471,859
448,185
12
Tax
114,199
120,188
Profit after tax
357,660
327,997
Other comprehensive income
0
0
Total comprehensive income
357,660
327,997
P ROPOSED DISTRIBUTION OF PROFIT
2013
DKK 1,000
2012
DKK 1,000
Profit after tax
357,660
327,997
Total amount available for distribution
357,660
327,997
Dividend at annual general meeting
Ordinary dividend
72,600
69,160
Extraordinary dividend
48,400
0
Total dividend
121,000
69,160
Charitable purposes
500
500
Transferred to reserve for net revaluation
under the intrinsic value method
-3
+5
Appropriation to own funds
236,163
258,332
Total distribution of the amount available
357,660
327,997
C ORE EARNINGS
Note
no.
2013
DKK 1,000
2012
DKK 1,000
Net income from interest
614,719
614,617
4
Net income from fees and provisions excl. commission
171,765
162,371
Income from sector shares
14,403
5,939
4
Foreign exchange income
13,293
12,591
Other operating income
2,730
3,303
Total core income excl. trade income
816,910
798,821
4
Trade income
26,925
24,116
Total core income
843,835
822,937
6
Staff and administration costs
254,909
252,796
10
Amortisations, depreciations and write-downs on intangible
and tangible assets
4,270
3,233
Other operating costs
13,827
8,705
Total costs etc.
273,006
264,734
Core earnings before impairments
570,829
558,203
11
Impairment charges for loans and other debtors etc.
-120,175
-156,844
Core earnings
450,654
401,359
Result for portfolio
+23,494
+48,535
Expenses for bank packages
2,292
1,709
Profit before tax
471,856
448,185
12
Tax
114,199
120,188
Profit after tax
357,660
327,997
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
Assets
Cash in hand and claims at call on central banks
63,064
483,188
13
Claims on credit institutions and central banks
416,913
373,300
Claims at notice on central banks
Money market operations and bilateral loans - term to
maturity under 1 year
0
214,032
176,002
92,578
Bilateral loans - term to maturity over 1 year
202,881
104,720
14,15
Loans and other debtors at amortised cost price
13,849,285
12,424,139
Loans and other debtors at amortised cost price
12,880,717
11,594,880
Wind turbine loans with direct funding
968,568
829,259
16
Bonds at current value
4,669,732
3,783,258
17
Shares etc.
208,697
212,710
Capital shares in associated companies
540
543
18
Land and buildings total
73,871
75,830
Investment properties
8,015
8,165
Domicile properties
65,856
67,665
19
Other tangible assets
4,385
3,981
Actual tax assets
24,501
40,370
Temporary assets
1,000
1,400
20
Other assets
263,856
276,182
Periodic-defined items
6,977
6,645
Total assets
19,582,821
17,681,546
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
Liabilities and equity
21
Debt to credit institutions and central banks
Money market operations and bilateral credits - term to
maturity under 1 year
1,754,884
656,258
1,198,071
294,208
Bilateral credits - term to maturity over 1 year
130,058
74,604
Bilateral credits from the KfW Bankengruppe
968,568
829,259
22
Deposits and other debts
14,113,816
12,866,748
23
Issued bonds at amortised cost price
249,814
340,809
24
Other liabilities
173,806
190,830
Periodic-defined items
917
205
Total debt
16,293,237
14,596,663
25
Provisions for deferred tax
13,188
15,151
15
Provisions for losses on guarantees
4,256
10,958
Total provisions for liabilities
17,444
26,109
Subordinated loan capital
200,193
199,607
Hybrid core capital
170,847
183,027
26
Total subordinated debt
371,040
382,634
27
Share capital
24,200
24,700
Reserve for net revaluation under the intrinsic value method
189
192
Profit carried forward
2,755,211
2,581,588
Proposed dividend etc.
121,500
69,660
Total shareholders’ equity
2,901,100
2,676,140
Total liabilities and equity
19,582,821
17,681,546
28
Own capital shares
29
Contingent liabilities etc.
Reserve for
net revalua-
tion under
the intrin- Profit Proposed Total
Share sic value carried dividend
shareholders’
DKK 1,000
2013
capital
method
forward
etc.
equity
Shareholders’ equity at the end
of the previous financial year
24,700
192
2,581,588
69,660
2,676,140
Reduction of share capital
-500
500
0
Dividend etc. paid
-69,660
-69,660
Dividend received on own shares
1,427
1,427
Shareholders’ equity after
allocation of dividend etc.
24,200
192
2,583,515
0
2,607,907
Purchase and sale of own shares
-64,467
-64,467
Total comprehensive income
-3
236,163
121,500
357,660
Shareholders’ equity on the
balance sheet date
24,200
189
2,755,211
121,500
2,901,100
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
Calculated pursuant to the Executive order on Capital Adequacy
issued by the Danish Financial Supervisory Authority.
End Dec. 2013 End Dec. 2012
DKK 1,000 DKK 1,000
Weighted items with credit and counterpart risks 12,235,761 10,601,717
Market risk 1,110,690 1,219,598
Operational risk 1,522,813 1,483,500
Total risk-weighted items 14,869,264 13,304,815
Shareholders’ equity 2,901,100 2,676,140
Proposed dividend etc. -121,500 -69,660
Reserve for net revaluation -189 -192
Core tier 1 capital (excl. hybrid core capital) 2,779,411 2,606,288
Hybrid core capital 164,500 172,000
Deduction for equity investments etc. above 10% -19,963 0
Deduction for the sum of equity investments etc. above 10% -63,503 0
Tier 1 capital 2,860,445 2,778,288
Subordinated loan capital 201,428 201,431
Reserve for net revaluation 189 192
Deduction for equity investments etc. above 10% -19,963 0
Deduction for the sum of equity investments etc. above 10% -63,503 0
Capital base after deductions 2,978,596 2,979,911
Core tier 1 capital ratio (excl. hybrid core capital) (%) 18.7 19.6
Tier 1 capital ratio (%) 19.2 20.9
Solvency ratio - Tier 2 (%) 20.0 22.4
Capital base requirements under Section 124 (2,1) of the
Danish Financial Business Act 1,189,541 1,064,385
2013
DKK 1,000
2012
DKK 1,000
Operation activities
Profit for the financial year
357,660
327,997
Amortisations, depreciations and write-downs
on intangible and tangible assets
4,270
3,233
Impairments charges for loans and other debtors etc.
164,088
198,529
Items not affecting liquidity
-2,195
11,135
Adjusted result of operations
523,823
540,894
Changes in operating capital
Claims on and debt to credit institutions etc., net
410,086
909,261
Loans and other debtors at amortised cost price
-1,589,234
123,892
Securities, not liquid and pledged
-77,691
234,305
Deposits and other debts
1,247,068
111,333
Issued bonds at amortised cost price
-90,995
1,851
Subordinated capital
-11,594
-29,852
Other assets and liabilities, net
5,249
-48,862
Cash flows from operating activities
416,712
1,842,822
Investment activities
Tangible assets, purchase
-3,125
-4,710
Tangible assets, sale
645
503
Cash flows from investment activities
-2,480
-4,207
Financing activities
Paid dividend, net
-68,233
-64,694
Own shares etc.
-64,467
-70,283
Cash flows from financing activities
-132,700
-134,977
Total effect on liquidity for the year
281,532
1,703,638
Cash and cash equivalents, beginning of year
4,364,004
2,660,366
Cash and cash equivalents, end of year
4,645,536
4,364,004
Cash and cash equivalents, end of year specified thus:
Cash in hand and claims at call on central banks
63,064
483,188
Claims on credit institutions and central banks
114,032
217,146
Securities, unpledged
4,468,440
3,663,670
Total cash and cash equivalents, end of year
4,645,536
4,364,004
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 other Danish requirements regarding information in the annual financial statements of listed finan-
cial companies.
The annual report is presented in DKK.
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.
Impairment charges for loans and debtors etc.
This item includes losses and impairment charges for loans and other debtors and losses and provisions
on guarantees. The item also includes losses and write-downs on claims on credit institutions.
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. Changes in the corporate tax rate will be taken into account.
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 cir-
cumstances, under which the adapted estimates form the basis for calculation of the collective impair-
ment charges. 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
collective impairments. The impairment is calculated as the difference between the book value and the
discounted value of the expected future payments.
Changes in impairments which have been made are adjusted in the profit and loss account under the
item »Impairment charges for loans and debtors etc.«.
Bonds and shares
Securities listed on a stock exchange are measured at current value determined at the quoted price,
best expressed by the closing price at the 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«. A deferred tax asset is
booked under the item »Deferred tax assets« following a cautious assessment of the asset’s value.
The effect of changes in the corporate tax rate is recognized in »Deferred tax assets« / »Provisions for
deferred tax«.
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 deferred tax and provisions for 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 deter-
mined. 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
The »Return on equity before tax, beginning of the year«, and the »Return on equity after tax, begin-
ning 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 2013 4,780.000 shares,. 2012:
4,840,000 shares, 2011: 4,940,000 shares, 2010: 5,040,000 shares and 2009: 5.040.000 shares.
The market value listed on page 2 and the current value of the proposed share buy-back programme
listed on pages 3, 11, 15 and 16 are calculated from the closing price of the Ringkjøbing Landbobank
share on 27 January 2014 at 1,171.
Impairment charges for loans etc. are listed excl. expenses for bank packages and impairment charges
for national bank package 1, etc.
N OTES TO THE A NNUAL R EPORT
Note
no.
2013
DKK 1,000
2012
DKK 1,000
1
Interest receivable
Claims on credit institutions and central banks
23,425
10,943
Loans and other debtors
719,154
769,656
Loans - interest concerning the impaired part of loans
-43,913
-41,685
Bonds
86,007
86,941
Total derivatives financial instruments,
of which
Currency contracts
-8,617
-4,104
8,016
4,880
Interest-rate contracts
-4,513
3,136
Other interest receivable
212
150
Total interest receivable
776,268
834,021
2
Interest payable
Credit institutions and central banks
23,385
27,163
Deposits and other debts
101,280
146,108
Issued bonds
8,015
11,496
Subordinated debt
13,221
15,828
Other interest payable
136
169
Total interest payable
146,037
200,764
3
Dividend on capital shares etc.
Shares
12,610
1,463
Total dividend on capital shares etc.
12,610
1,463
4
Fees and commissions
Gross income from fees and commissions
Securities trading
33,646
28,279
Asset management
84,785
75,271
Payment handling
21,524
20,898
Loan fees
6,273
14,578
Guarantee commissions
61,527
41,371
Other fees and commissions
22,058
30,119
Total gross income from fees and commissions
229,813
210,516
Fees and commissions paid
Securities trading
6,721
4,163
Asset management
5,030
4,289
Payment handling
2,177
2,462
Loan fees
2,069
2,514
Other fees and commissions
15,126
10,601
Total fees and commissions paid
31,123
24,029
Net income from fees and commissions
Securities trading
26,925
24,116
Asset management
79,755
70,982
Payment handling
19,347
18,436
Loan fees
4,204
12,064
Guarantee commissions
61,527
41,371
Other fees and commissions
6,932
19,518
Total net income from fees and commissions
198,690
186,487
Foreign exchange income
Total net income from fees, commissions and
foreign exchange income
13,293
211,983
12,591
199,078
Note 2013 2012
no. DKK 1,000 DKK 1,000
5 Value adjustments
Loans and other debtors, current value adjustment* -974 6,433
Bonds 1,653 78,318
Shares etc. 9,479 -25,862
Investment properties 150 -415
Foreign exchange income 13,293 12,591
Total derivative financial instruments, -7,846 -26,497
of which
Interest-rate contracts -7,846 -26,497
Issued bonds 2,491 1,041
Other liabilities 4,828 1,348
Total value adjustments 23,074 46,957
* Cf. note 34.
6 Staff and administration costs
Payments to general management,
board of directors and shareholders’ committee
General management*/**:
John Fisker:
Fixed payment 3,973 3,870
Bent Naur:
Fixed payment 0 1,317
Total payment 3,973 5,187
Board of directors*:
Jens Lykke Kjeldsen, chairman 272 243
Martin Krogh Pedersen, deputy chairman 164 126
Gert Asmussen 140 126
Inge Sandgrav Bak 140 126
Gravers Kjærgaard 158 162
Jørgen Lund Pedersen 117 0
Keld Hansen 23 126
Bo Bennedsgaard 140 126
Gitte E. S. Vigsø 140 126
Total payment 1,294 1,161
Shareholders committee*:
Total payment 366 318
Total 5,633 6,666
Staff costs
Salaries 117,365 111,848
Pensions 12,066 11,478
Social security expenses 900 917
Costs depending on number of staff 16,195 14,978
Total 146,526 139,221
Other administration costs 102,750 106,909
Total staff and administration costs 254,909 252,796
* The general management, the board of directors and the shareholders
committee does not receive variable payment.
** The general management has a company car.
7 Number of full-time employees
Average number of employees during the financial year
converted into full-time employees 251 244
Note
no.
2013
DKK 1,000
2012
DKK 1,000
8
Salaries to major risk takers and control functions
Fixed salary
4,283
4,136
Variable salary
175
150
Pension
471
454
Total
4,929
4,740
Number of full-time employees
5
5
9
Fee to the auditor elected by the general meeting
Statutory audit
625
610
Other declarations with security
50
131
Advice on tax
13
5
Other services
37
0
Total fee to the auditor elected by the general meeting
725
746
The bank has also an internal auditor.
10
Amortisations, depreciations and write-downs on intangible
and tangible assets
Tangible assets
Domicile properties, depreciations
1,555
684
Other tangible assets, depreciations
2,715
2,549
Total amortisations, depreciations and write-downs on
intangible and tangible assets
4,270
3,233
11
Impairment charges on loans and other debtors etc.
Net changes in impairment charges on loans and other
debtors and provisions for losses on guarantees
95,058
108,506
Actual realised net losses
69,030
90,023
Interest concerning the impaired part of loans
-43,913
-41,685
Total impairment charges on loans and other debtors etc.
120,175
156,844
12
Tax
Tax calculated on the years profit
114,967
109,075
Adjustment of deferred tax
-1,660
10,362
Adjustment of deferred tax due to change in tax rate
-303
0
Adjustment of tax calculated for previous years
1,195
751
Total tax
114,199
120,188
Effective tax rate (%):
The current tax rate of the bank
25.0
25.0
Permanent deviations
-1.0
1.6
Adjustment of deferred tax due to change in tax rate
-0.1
0.0
Adjustment of tax calculated for previous years
0.3
0.2
Total effective tax rate
24.2
26.8
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
13
Claims on credit institutions and central banks
Claims at call
114,032
41,144
Up to and including 3 months
100,000
226,002
More than 3 months and up to and including 1 year
0
1,434
More than 1 year and up to and including 5 years
202,881
104,220
More than 5 years
0
500
Total claims on credit institutions and central banks
416,913
373,300
Distributed as follows:
Claims at notice on central banks
0
176,002
Claims on credit institutions
416,913
197,298
416,913
373,300
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
14
Loans and other debtors at amortised cost price
At call
1,311,786
2,027,476
Up to and including 3 months
674,795
597,833
More than 3 months and up to and including 1 year
1,542,624
1,354,204
More than 1 year and up to and including 5 years
4,601,579
4,300,538
More than 5 years
5,718,501
4,144,088
Total loans and other debtors at amortised cost price
13,849,285
12,424,139
15
Impairment charges for loans and other debtors and
provisions for losses on guarantees
Individual impairment charges
Cumulative individual impairment charges for loans and other
debtors at the end of the previous financial year
632,529
577,352
Impairment charges/value adjustments during the year
Reverse entry - impairment charges made in previous
financial years
255,157
-90,895
243,459
-124,433
Booked losses covered by impairment charges
Cumulative individual impairment charges for loans and
other debtors on the balance sheet date
-60,278
736,513
-63,849
632,529
Collective impairment charges
Cumulative collective impairment charges for loans and other
debtors at the end of the previous financial year
114,876
67,466
Impairment charges/value adjustments during the year
Cumulative collective impairment charges for loans and
other debtors on the balance sheet date
-2,224
112,652
47,410
114,876
Total cumulative impairment charges for loans and other
debtors on the balance sheet date
849,165
747,405
Provisions for losses on guarantees
Cumulative individual provisions for losses on guarantees at
the end of the previous financial year
10,958
5,038
Provisions/value adjustments during the year
3,282
10,009
Reverse entry - provisions made in previous financial years
-9,245
-3,835
Booked losses covered by provisions
Cumulative individual provisions for losses on guarantees
on the balance sheet date
-739
4,256
-254
10,958
Total cumulative impairment charges for loans and other
debtors and provisions for losses on guarantees on the
balance sheet date
853,421
758,363
16
Bonds at current value
Listed on the stock exchange*
4,669,732
3,783,258
Total bonds at current value
4,669,732
3,783,258
* See page 24 of the management report, where the rating is stated.
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
17
Shares etc.
Listed on NASDAQ OMX Copenhagen
15,700
29,104
Unlisted shares at current value
1,372
1,505
Sector shares at current value
191,625
182,101
Total shares etc.
208,697
212,710
18
Land and buildings
Investment properties
Current value at the end of the previous financial year
8,165
6,681
Acquisitions during the year, including improvements
0
2,184
Disposals during the year
-817
-206
Value adjustments to current value for the year
374
-494
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
293
0
Current value on the balance sheet date
8,015
8,165
Domicile properties
Reassessed value at the end of the previous financial year
67,665
68,041
Acquisitions during the year, including improvements
0
308
Disposals during the year
-350
0
Depreciations for the year
-555
-559
Write-downs after revaluation for the year
-1,000
-125
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
96
0
Total reassessed value on the balance sheet date
65,856
67,665
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.
19
Other tangible assets
Cost price
Cost price at the end of the previous financial year
without depreciations and write-downs
29,517
28,824
Acquisitions during the year, including improvements
3,125
2,218
Disposals during the year
-3,796
-1,525
Total cost price on the balance sheet date
28,846
29,517
Amortisations, depreciations and write-downs
Amortisations, depreciations and write-downs at the end of
the previous financial year
25,536
23,931
Depreciations for the year
2,715
2,548
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
-3,790
-943
Total amortisations, depreciations and write-downs on the
balance sheet date
24,461
25,536
Total other tangible assets on the balance sheet date
4,385
3,981
20
Other assets
Interest and commissions receivable
72,697
51,425
Positive market value of derivative financial instruments
130,888
172,253
Miscellaneous receivables and other assets
43,049
35,673
Other deposits
17,222
16,831
Total other assets
263,856
276,182
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
21
Debt to credit institutions and central banks
Debt payable on demand
298,236
214,603
Up to and including 3 months
315,311
30,726
More than 3 months and up to and including 1 year
137,287
169,143
More than 1 year and up to and including 5 years
560,112
516,937
More than 5 years
443,938
266,662
Total debt to credit institutions and central banks
1,754,884
1,198,071
Distributed as follows:
Debt to credit institutions
1,754,884
1,198,071
1,754,884
1,198,071
The bank has undrawn long-term committed revolving credit
facilities equivalent to:
Term to maturity under 1 year
0
74,604
Total
0
74,604
22
Deposits and other debts
On demand*
8,325,047
7,536,906
Deposits and other debts at notice:
Up to and including 3 months
1,205,176
1,487,572
More than 3 months and up to and including 1 year
1,426,171
908,664
More than 1 year and up to and including 5 years
1,501,668
1,414,739
More than 5 years
1,655,754
1,518,867
Total deposits and other debts
14,113,816
12,866,748
Distributed as follows:
On demand
7,933,649
6,557,380
At notice
337,480
175,268
Time deposits
2,549,938
2,921,952
Long-term deposit agreements
1,883,569
1,906,942
Special types of deposits*
1,409,180
1,305,206
* Special types of deposits are entered under the item »On demand«
14,113,816
12,866,748
pending payment, while in the specification of the different types of deposits,
the sum is instead included under »Special types of deposits«.
23
Issued bonds at amortised cost price
Up to and including 3 months
3,727
4,583
More than 3 months and up to and including 1 year
0
220,000
More than 1 year and up to and including 5 years
246,087
116,226
Total issued bonds at amortised cost price
249,814
340,809
Distributed as follows:
Issues in Danish kroner
Nom. 220 million DKK
0
220,000
Issues in Norwegian kroner
Nom. 100 million NOK*
88,540
101,670
Regulation at amortised cost price and adjustment to
current value of issues in Norwegian kroner*
5,768
8,256
Issues in Euro:
Nom. 20 million EUR
149,206
0
Other issues
6,300
10,883
* Cf. note 34.
249,814
340,809
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
24
Other liabilities
Interest and commissions payable
25,597
41,469
Negative market value of derivative financial instruments
36,347
55,635
Micellaneous payables and other liabilities
111,862
93,726
Total other liabilities
173,806
190,830
25
Provisions for deferred tax
The calculated provisions for deferred tax relates to the balance
sheet items:
Loans and other debtors
-2,857
-2,177
Tangible assets
-576
-670
Temporary assets
-74
0
Other balance sheet items
16,695
17,998
Total provisions for deferred tax
13,188
15,151
26 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 201,428 201,431
Total subordinated loan capital 201,428 201,431
Hybrid core capital
Bond loan**/*** 4.795 DKK 200 Indefinite 2 March 2015
200,000
200,000
Own holding
-35,500
-28,000
Total hybrid core capital
164,500
172,000
Subordinated debt included in the calculation of
the capital base
365,928
401,431
Regulation at amortised cost price and adjustment to current value
5,112
9,203
Total subordinated debt
371,040
382,634
* 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 - 2013: tDKK 5,176 / 2012: tDKK 6,332
** 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 - 2013: tDKK 8,045 / 2012: tDKK 9,496
*** Admitted for listing on NASDAQ OMX Copenhagen.
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
27
Share capital
Number of shares at DKK 5 each:
Beginning of year
4,940,000
5,040,000
Cancellation during the year
-100,000
-100,000
End of year
4,840,000
4,940,000
Reserved for subsequent cancellation
60,000
90,000
Share capital
24,200
24,700
The whole share capital has been admitted for listing on
NASDAQ OMX Copenhagen.
28
Own capital shares
Own capital shares included in the balance sheet at
0
0
The market value is
68,747
73,978
Number of own shares:
Beginning of year
96,075
100,855
Purchase during the year
318,806
335,686
Sale during the year
-252,327
-240,466
Cancellation during the year
-100,000
-100,000
End of year
62,554
96,075
Nominal value of holding of own shares, end of year
313
480
Own shares’ proportion of share capital end of year (%):
Beginning of year
1.9
2.0
Purchase during the year
6.6
6.8
Sale during the year
-5.2
-4.9
Cancellation during the year
-2.0
-2.0
End of year
1.3
1.9
Total purchase price for shares acquired during the year
362,659
245,185
Total sales price for shares sold during the year
298,192
174,902
The transactions for the year in own shares were made on the basis
of the bank’s ordinary trading with shares.
29
Contingent liabilities etc.
Contingent liabilities
Finance guarantees
949,047
693,774
Guarantees for foreign loans
0
5,595
Guarantees against losses on mortgage credit loans
55,841
51,951
Guarantees against losses Totalkredit
112,284
122,797
Registration and conversion guarantees
55,605
70,999
Sector guarantees
48,175
46,816
Other contingent liabilities
680,982
675,168
Total contingent liabilities
1,901,934
1,667,100
30
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.
968,568
829,259
As security for clearing, the bank has pledged securities from its
holding to the Central Bank of Denmark to a total market price of
321,192
250,623
Provision of security under CSA agreements
75,372
86,101
Note
no.
31 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.
32 Related parties
Related parties are the bank’s board of directors and general management and their relatives.
Ringkjøbing Landbobank advises that it has no related parties with controlling interest.
There were no transactions during the year with the board of directors and the general manage-
ment apart from the payment of salaries and fees etc., securities trading and the provision of
loans and guarantees.
It is also noted that all of the transactions performed in 2013 and 2012 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 the general 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 general management 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 the general 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 2013
End Dec. 2013 End Dec. 2012
DKK 1,000 DKK 1,000
General management (Mastercard) 250 250
Board of directors, incl. elected by the staff 1.0%-10.0% 8,260 19,012
New engagements during the year have been granted for 4,296 1,162
All engagements are performed under market terms,
including both interest and guarantee commission rates.
Security pledged from members of the bank’s:
General management 0 0
Board of directors, incl. elected by the staff 79 2,234
The board of directors’ and the general management share-
holdings* in Ringkjøbing Landbobank at the end of the year
The board of directors:
End Dec. 2013 End Dec. 2012
Number of shares Number of shares
Jens Lykke Kjeldsen 5,865 5,865
Martin Krogh Pedersen 6,501 6,501
Gert Asmussen 4,528 4,528
Inge Sandgrav Bak 2,521 2,448
Gravers Kjærgaard 6,663 6,663
Jørgen Lund Pedersen 100 -
Keld Hansen - 16,636
Bo Bennedsgaard 530 530
Gitte E. S. Vigsø 30 30
General management:
John Fisker 15,192 15,192
* Stated in accordance with the rules on insiders.
Note
Eno.
33 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.
Loans and other debtors are measured in the balance sheet at amortised cost. The difference
from current value is calculated as fees and commissions received, costs incurred in the 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 nomi-
nal 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 impairment charges for
claims on credit institutions and central banks.
Issued bonds and subordinated debt are measured at amortised cost price. The difference
between 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
Book value
DKK 1,000
End Dec. 2013
Current value
DKK 1,000
Book value
DKK 1,000
End Dec. 2012
Current value
DKK 1,000
Cash in hand + claims at call on central banks
63,064
63,064
483,188
483,188
Claims on credit institut. and central banks*
438,117
438,117
373,612
373,612
Loans and other debtors at amort. cost price*
13,878,254
13,904,051
12,452,751
12,508,615
Bonds at current value*
4,685,946
4,685,946
3,799,528
3,799,528
Shares etc.
209,237
209,237
213,253
213,253
Derivative financial instruments
130,888
130,888
189,084
189,084
Total financial assets
19,405,506
19,431,303
17,511,416
17,567,280
Financial liabilities
Debt to credit institutions and central banks*
1,755,861
1,755,861
1,198,895
1,198,472
Deposits and other debts*
14,125,574
14,125,306
12,893,489
12,934,285
Issued bonds at amortised cost price*/**
253,232
247,463
345,475
337,219
Derivative financial instruments
36,347
36,347
55,635
55,635
Subordinated debt*/**
378,762
371,980
390,660
372,857
Total financial liabilities
16,549,776
16,536,957
14,884,154
14,898,468
* 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
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
34
Hedging
The following are hedged:
Fixed interest loans, 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:
Loans
32,501
44,785
Issued bonds at amortised cost price
94,308
109,926
Subordinated loan capital
200,193
199,607
Hybrid core capital
170,847
183,027
Cover is thus:
Interest swaps - total synthetic principal
190,250
198,542
Currency swaps - total synthetic principal
289,968
303,101
Total current value
6,990
11,113
35 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 19 - 30 of the management report for a description of financial risks
and policies and objectives for their management:
• Credit risks - page 20
• Interest rate risk - page 25
• Foreign exchange risk - page 26
• Share risk - page 26
• Liquidity risk - page 28
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. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
36
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
63,064
483,188
Claims on credit institutions and central banks
416,913
373,300
Loans and other debtors at amortised cost price
13,849,285
12,424,139
Bonds at current value
4,669,732
3,783,258
Shares etc.
208,697
212,710
Capital shares in associated companies
540
543
Other assets, including derivative financial instruments
288,357
316,552
19,496,588
17,593,690
Off-balance sheet items
Guarantees (contingent liabilities)
1,901,934
1,667,100
1,901,934
1,667,100
Maximum credit exposure excluding unutilsed credit facilities
21,398,522
19,260,790
Unutilised credit facilities*
4,261,468
4,026,576
Total maximum credit exposure
25,659,990
23,287,366
* The bank has made unused credit facilities to a total of DKK 4,3 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. The volume of committed credit facilities is insignificant.
A more detailed division of the items »Loans and other debtors at amortised cost price«, »Guaran-
tees« and »Unutilised credit facilities« are given below. There is also a classification covering only the
items »Loans made and other debtors at amortised cost price« and »Guarantees«.
Loans, guarantees and unutilised credit facilities
in percent, end of year, by sector
End Dec. 2013 End Dec. 2012
Per cent Per cent
Public authorities 0.0 0.1
Business:
Agriculture, hunting and forestry
Cattle farming etc. 2.5 2.8
Pig farming etc. 2.3 2.5
Other agriculture, hunting and forestry 4.2 4.2
Fishing 1.5 1.6
Mink production 1.1 1.2
Industry and raw materials extraction 3.1 2.1
Energy supply 1.3 0.6
Wind turbines - Denmark 8.6 5.8
Wind turbines - foreign 13.4 12.6
Building and construction 1.7 1.5
Trade 4.1 4.3
Transport, hotels and restaurants 1.6 1.4
Information and communication 0.3 0.2
Financing and insurance 8.0 10.7
Real estate 9.7 10.2
Other business 9.3 9.8
Total business 72.7 71.5
Private 27.3 28.4
Total 100.0 100.0
Note
no.
End Dec. 2013
Per cent
End Dec. 2012
Per cent
36
Credit risk - continued
Loans and guarantees in percent, end of year, by sector
Public authorities
0.0
0.0
Business:
Agriculture, hunting and forestry
Cattle farming etc.
2.6
3.0
Pig farming etc.
2.4
2.6
Other agriculture, hunting and forestry
3.9
4.2
Fishing
1.6
1.8
Mink production
0.9
1.1
Industry and raw materials extraction
2.6
2.0
Energy
1.0
0.8
Wind turbines - Denmark
9.5
6.6
Wind turbines - foreign
14.9
14.1
Building and construction
1.4
1.3
Trade
3.7
3.6
Transport, hotels and restaurants
1.7
1.5
Information and communication
0.2
0.1
Financing and insurance
9.6
11.7
Real estate
11.4
12.2
Other business
8.3
7.8
Total business
75.7
74.4
Private
24.3
25.6
Total
100.0
100.0
The classifications by business was made on the basis of Statistics Denmark’s sector codes etc.
Comments on distribution by sector
It is the bank’s general assessment that the credit quality of its loans is high. The ability of the
bank’s customers’ to pay is generally good, and combined with the bank’s solid hedging of
many engagements through collateral, the result is low credit risks.
Private customers account for a total of 24.3% of Ringkjøbing Landbobank’s total loans and
guarantees. The majority of these customers are found in the bank’s core area in central and
western Jutland and they are characterised by a solid creditworthiness. Some of the bank’s
private customers are, however, challenged by a weak real estate market, and the bank made
a number of impairment charges on the portfolio of private customers in 2013. The credit rat-
ing was also lowered for some private customers. As in previous years, actual losses on private
customers were, however, at a low level. Collateral received from private customers primarily
consists of mortgages on real estate (private homes).
The bank has a well-diversified portfolio related to agriculture, with pig farms accounting for
2.4% of the total volume of loans and guarantees, cattle accounting for 2.6%, and other agri-
culture for 3.9%. The total exposure to these three agricultural sectors fell from 9.8% in 2012
to 8.9% in 2013. The terms of trade for agriculture have improved over the last couple of years,
but the economic conditions for agriculture as a whole remain difficult. The earnings within
agriculture generally remain weak, and despite the fact that the bank’s agricultural customers
are relatively less indebted than the sector in general, the bank continues to allocate conside-
rable impairments for this sector. Security consists primarily of mortgages on agricultural
property (land, buildings and other production facilities on the farms). To this must be added
assignment of aid per hectare and other accounts etc.
Note
no.
36 Credit risk - continued
Loans for wind turbines amount to a total of 24.4% and they are thus the largest industry in the
bank’s total loans and guarantees. Wind turbine funding has been a core competence for the
bank for over 20 years. The exposure to wind turbines primarily concerns wind turbines erected
in Germany, but many turbines have also been erected in Denmark in the past year, and the
bank’s loans for these have increased appreciably. The bank’s concept for wind turbine finan-
cing is based on first mortgage financing. The concept includes a legal and commercial due
diligence, which combined with subsidy schemes provide a high degree of security. Fixed prices
to the producers on the German market provide additional security that the bank will be paid.
The bank’s realised losses in this sector were minimal, and the financial crisis confirmed that the
risk in this sector is limited. Security consists primarily in first mortgages on wind turbines as well
as assignment of electricity accounts and possible subsidies. The bank is still experiencing an
efficient wind turbine market with high marketability.
Real estate accounts for a total of 11.4% of the bank’s total loans and guarantees. This is a rela-
tively modest share compared to other banks, and this reflects the bank’s conservative approach
to this sector. Loans and security can be divided into the following main groups:
• Loans with first mortgages on properties (the majority of loans)
• Loans with second mortgage on real property and a strong lessee with an irrevocable lease
In the context of second mortgage financing, the bank emphasises the project’s ability to settle
the debt prior to expiration of the lease.
Both types of loans showed their strength during the financial crisis, and the bank feels comfort-
able about them.
Financing and insurance comprise a total of 9.6% of the bank’s total loans and guarantees and
include inter alia exposure to well-consolidated financial counterparties and the bank’s concept
for securities lending. Security in this concept is primarily provided in the form of listed securi-
ties.
The concept has certainly demonstrated its strength during the extremely volatile periods on
the financial markets during the financial crisis.
Description of security
Ringkjøbing Landbobank wants to reduce the risk to the extent possible when entering into
transactions with its customers by obtaining security in the form of mortgages on physical
assets, securities, bank deposits etc. as well as obtaining guarantees, including by surety, and
letters of subordination. Securities, cash and mortgages on real estate and movable property are
most frequently used as security.
The bank monitors the value of security obtained on a regular basis. When computing loan and
mortgageable values, a deduction from the value is always made to cover the risk in connection
with realisation, costs etc. The following table shows the nominal security values, i.e. the value
of the nominal mortgage without any reductions. A reduction can be relevant if an asset’s actual
value is insufficient to secure the full value of a mortgage if realised. Security was provided
mainly in connection with the establishment of loans, and in step with regular repayments of
the individual loan, excess security will occur in some cases. On the other hand, accounts also
exist where the value of the security, if any, is insufficient to cover the current debt. The follow-
ing table shows considerable nominal security in proportion to the bank’s total loans, and there
may thus be unsecured portions in the individual accounts.
Securities
and cash
DKK 1,000
Real estate
DKK 1,000
Movable
property
DKK 1,000
Total
DKK 1,000
2013
Nominal securities for not
impaired loans by sector
Public authorities
0
3,195
300
3,495
Business:
Agriculture, forestry and fishing
265,508
1,168,200
409,468
1,843,176
Industry and raw materials extraction
14,030
90,846
176,335
281,211
Energy supply
154,481
457,352
2,335,574
2,947,407
Building and construction
16,307
71,125
78,929
166,361
Trade
77,302
218,261
153,691
449,254
Transport, hotels and restaurants
54,500
36,524
122,259
213,283
Information and communication
836
13,668
13,679
28,183
Financing and insurance
762,978
287,626
5,700
1,056,304
Real estate
98,167
1,347,367
13,780
1,459,314
Other business
565,406
859,063
122,061
1,546,530
Total business
2,009,515
4,550,032
3,431,476
9,991,023
Private
791,612
2,018,581
250,139
3,060,332
Total
2,801,127
6,571,808
3,681,915
13,054,850
Securities
and cash
DKK 1,000
Real estate
DKK 1,000
Movable
property
DKK 1,000
Total
DKK 1,000
2012
Nominal securities for not
impaired loans by sector
Public authorities
0
3,195
1,800
4,995
Business:
Agriculture, forestry and fishing
249,113
1,066,918
403,538
1,719,569
Industry and raw materials extraction
41,644
56,114
131,746
229,504
Energy supply
137,486
397,341
1,991,600
2,526,427
Building and construction
7,794
63,141
91,539
162,474
Trade
43,410
123,047
136,216
302,673
Transport, hotels and restaurants
5,179
33,141
172,610
210,930
Information and communication
1,288
18,599
7,600
27,487
Financing and insurance
632,124
336,507
2,830
971,461
Real estate
77,759
860,177
14,525
952,461
Other business
368,853
980,019
112,823
1,461,695
Total business
1,564,650
3,935,004
3,065,027
8,564,681
Private
714,011
1,871,096
220,388
2,805,495
Total
2,278,661
5,809,925
3,287,215
11,375,171
The nominal collateral values are not necessarily indicative of the actual collateral value.
Note
no.
36 Credit risk - continued
Credit quality of loans and guarantees which are neither in arrears or have been impaired
The bank has credit rated a substantial number of customers. Statistical models are used for the
rating of private and small business customers (based on the probability of default), while an
expert model is used for major business customers.
The statistical models use various factors, including information on the customer’s assets and a
quantity of behavioural data. The factors chosen are those among a number of possible factors
which best describe previously distressed accounts.
The expert model for major business customers is based on information on the customer’s finan-
cial standing and earning capacity. A general model is used for the business customer group as
a whole, and three additional variant models are specially adapted to credit exposure to wind
turbines, agriculture and real estate.
The figure below indicates that the credit quality is high for 63% of loans and guarantees which
have not been impaired and are not in arrears, compared to 62% at the end of 2012. Concur-
rently herewith, the share of customers with low credit quality increased from 12% to 13%,
whereas the group in the middle was reduced. The group of non-classified accounts is 6% and
consists mainly of small business customers from a wide range of sectors.
Some of the customers in the group with a fall in the rating for 2013 are private customers whose
financial position is challenged by the economic conditions, including a weak real estate market.
The bank gained many new customers throughout 2013, and when establishing new customer
relationships, the bank is highly attentive to the customers’ creditworthiness and potential risks.
A separate review of new customers in 2013 shows that these customers’ creditworthiness is better
on average than the bank’s portfolio in general. The bank’s customers with high creditworthiness
also repay debts at a high rate with a resulting natural run-off of loans of high standing.
The aggregate result is that the creditworthiness of the bank’s customers is at the same level as
in 2012.
Distribution of loans and guarantees
without individual impairments or arrears
70
60 2013 2012
50
40
30
20
10
0
High Medium Low Not classified
Credit quality
Total loans and quarantees without individual impairments or arrears (million DKK)
2013 14,859
2012 12,943
Arrears
under
90 days
DKK 1,000
Arrears
over
90 days
DKK 1,000
Arrears
total
DKK 1,000
Total loans
inclusive
arrears
DKK 1,000
2013
Distribution by time from the due
date for loan engagements without
impairments in arrears
Public authorities
6
0
6
6
Business:
Agriculture, forestry and fishing
18,672
478
19,150
115,398
Industry and raw materials extraction
2,428
26
2,454
19,002
Energy supply
5,132
25
5,157
16,941
Building and construction
1,598
117
1,715
8,086
Trade
14,459
652
15,111
59,562
Transport, hotels and restaurants
1,457
1
1,458
21,035
Information and communication
5,922
74
5,996
8,318
Financing and insurance
721
541
1,262
40,717
Real estate
3,754
110
3,864
21,736
Other business
18,386
929
19,315
93,586
Total business
72,529
2,953
75,482
404,380
Private
28,281
3,525
31,806
152,018
Total
100,816
6,478
107,294
556,398
2012
Arrears
under
90 days
DKK 1,000
Arrears
over
90 days
DKK 1,000
Arrears
total
DKK 1,000
Total loans
inclusive
arrears
DKK 1,000
Distribution by time from the due
date for loan engagements without
impairments in arrears
Public authorities
47
0
47
47
Business:
Agriculture, forestry and fishing
14,193
1,259
15,452
80,736
Industry and raw materials extraction
1,761
108
1,869
15,411
Energy supply
3,666
11
3,677
19,347
Building and construction
1,078
656
1,734
8,235
Trade
3,756
622
4,378
34,415
Transport, hotels and restaurants
1,013
184
1,197
4,261
Information and communication
293
164
457
1,227
Financing and insurance
2,910
1,313
4,223
9,638
Real estate
2,306
4,005
6,311
24,755
Other business
10,515
1,222
11,737
69,172
Total business
41,491
9,544
51,035
267,197
Private
32,078
8,797
40,875
174,014
Total
73,616
18,341
91,957
441,258
Note
no.
36
Credit risk - continued
The value of loans where individual impairment charges have been made
Major Total Individual
financial
difficulties
DKK 1,000
Breach
of contract
DKK 1,000
Relaxation
of terms
DKK 1,000
Probable
bankruptcy
DKK 1,000
credit
exposure
DKK 1,000
impairment
charges
DKK 1,000
Credit exposure by reason
for impairment
Public authorities
0
0
0
0
0
0
Business:
Agriculture, forestry and fishing
166,597
82,535
115,805
99,471
464,408
332,099
Industry and raw materials
extraction
12,837
2,075
3,561
0
18,473
13,370
Energy supply
1,639
3,163
3,073
0
7,875
5,899
Building and construction
13,095
3,370
0
4,841
21,306
17,541
Trade
15,167
10,703
2,335
440
28,645
17,756
Transport, hotels and restaurants
11,224
3,323
3,461
7,253
25,261
19,394
Information and communication
537
52
36
115
740
745
Financing and insurance
0
4,195
945
856
5,996
3,740
Real estate
61,997
50,394
3,388
58,676
174,455
74,317
Other business
38,790
25,409
12,099
7,097
83,395
51,009
Total business
321,883
185,219
144,703
178,749
830,554
535,870
Private
176,379
112,736
30,131
36,643
355,889
204,899
Total credit exposure 2013
498,262
297,955
174,834
215,392
1,186,443
740,769
Total credit exposure 2012
363,927
276,948
185,797
129,123
955,795
643,487
Major
financial
Breach
Relaxation
Probable-
difficulties
DKK 1,000
of contract
DKK 1,000
of terms
DKK 1,000
bankruptcy
DKK 1,000
Total
DKK 1,000
2013
Individual impairment charges
290,460
189,283
136,800
124,226
740,769
Security values for accounts
which have been impaired
104,823
58,518
21,282
86,676
271,299
2012
individual impairment charges
242,601
174,863
98,186
127,837
643,487
Security values for accounts
which have been impaired
69,773
55,858
17,232
64,305
207,168
The bank is particularly focused on covering the risk on accounts which have been impaired. Under the
bank’s credit policy, these accounts must be covered to the greatest possible extent by securities. When
determining the need for an impairment charge, the value of securities is included at the 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 an impairment charge.
Note
no.
End Dec. 2013
DKK 1,000
End Dec. 2012
DKK 1,000
36
Credit risk - continued
Loans and other debtors with an objective indication of
impairment included in the balance sheet at a book value
greater than zero
Individual impaired loans
Balance for loans and other debtors before impairments
1,342,665
909,961
Impairment charges
-678,560
-586,017
Balance for loans and other debtors after impairments
664,105
323,944
Collective impaired loans
Balance for loans and other debtors before impairments
12,996,640
11,908,553
Impairment charges
-112,652
-114,876
Balance for loans and other debtors after impairments
12,883,988
11,793,677
Suspended calculation of interest
Loans and other debtors with suspended calculation of
interest on the balance sheet date
85.258
113.312
Credit risk on derivative financial instruments
Positive market value (by counterpart risk) after netting
Counterpart riskweight 20%
92,674
140,002
Counterpart riskweight 75%
39,859
65,836
Counterpart riskweight 100%
59,473
49,812
Counterpart riskweight 150%
408
0
Total counterpart riskweight
192,414
255,650
37
Foreign exchange risk
Total assets in foreign currency
5,004,562
5,252,363
Total liabilities in foreign currency
3,843,183
3,119,494
Foreign exchange indicator 1
Foreign exchange indicator 1 in per cent
of tier 1 capital after deductions (%)
44,391
1.6
16,838
0.6
Foreign exchange indicator 2
Foreign exchange indicator 2 in per cent
of tier 1 capital after deductions (%)
1.170
0.0
212
0.0
38
Interest rate risk
Total interest rate risk
18,493
17,102
Total interest rate risk (%)
0.6
0.6
Interest rate risk by the foreign currencies:
DKK
23,195
18,710
NOK
-1,287
-2,453
EUR
-3,190
996
CHF
-83
-202
USD
-126
105
GBP
-17
-45
Other currencies
1
-9
Total
18,493
17,102
Note
no.
39 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 financial assets etc. The model combines the histori-
cal knowledge of the covariation on the financial 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 etc. 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 27 - 28 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
2013
Interest
15.2
1.9
26.6
5.3
Foreign currency
0.3
0.1
0.3
0.6
Share
3.2
1.9
4.0
1.5
Diversification
-3.7
-1.4
-4.9
-2.2
Total VaR-figure
14.9
2.5
26.0
5.2
Development in Value at Risk
30
Interest Foreign currency
25 Share Total
20
15
10
5
0
Note
no.
40
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
61,699
1,925
Spot, sale
86,883
-247
Forward transactions/futures, purchase
721,392
-7,371
111,128
2,265
Forward transactions/futures, sale
Swaps
Options, purchase
Options, sale
2,295,550
19,136
109,724
13,272
Interest-rate contracts
Spot, purchase
277,305
1,293
Spot, sale
227,172
-3,329
Forward transactions/futures, purchase
4,083
-14
Forward transactions/futures, sale
24,194
-61
210,929
-2,395
Swaps
4,043
8
121,627
-681
Options, purchase
4,022
133
61,715
617
Options, sale
4,022
-134
61,715
-617
Share contracts
Spot, purchase
32,859
749
Spot, sale
31,713
-722
Forward transactions/futures, purchase
120
162
Forward transactions/futures, sale
120
-164
Over 1 year
and up to 5 years Over 5 years
Net
Nominal market
value value
Nominal
value
Net
market
value
Foreign-exchange contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
271
9
Swaps
Options, purchase
Options, sale
303,341
4,467
Interest-rate contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
Swaps
1,184,503
-12,595
363,206
2,376
Options, purchase
130,566
2,942
122,409
7,656
Options, sale
130,566
-2,942
122,409
-7,656
Other derivative contracts
Credit Default Swaps
74,603
1,087
40 Derivative financial instruments - continued
DKK 1,000
Total net
Total nominal value marketvalue
Foreign-exchange contracts
2013
2012
2013
2012
Spot, purchase
61,699
41,976
1,925
99
Spot, sale
86,883
23,902
-247
-115
Forward transactions/futures, purchase
832,520
1,220,313
-5,106
3,197
Forward transactions/futures, sale
2,405,274
3,706,939
32,417
20,506
Swaps
Options, purchase
Options, sale
303,341
456,206
4,467
21,788
Interest-rate contracts
Spot, purchase
277,305
321,330
1,293
791
Spot, sale
227,172
110,704
-3,329
-1,551
Forward transactions/futures, purchase
4,083
11,822
-14
212
Forward transactions/futures, sale
235,394
91,095
-2,456
-691
Swaps
1,673,379
1,584,932
-10,892
-12,834
Options, purchase
318,712
216,615
11,348
11,312
Options, sale
318,712
216,615
-11,349
-11,312
Share contracts
Spot, purchase
32,859
46,054
749
-264
Spot, sale
31,713
47,816
-722
310
Forward transactions/futures, purchase
120
62
162
31
Forward transactions/futures, sale
120
32
-164
-31
Other derivative contracts
Credit Default Swaps
74,603
74,606
1,087
-931
Net market value, total
19,169
30,517
40 Derivative financial instruments - continued
DKK 1,000
M
a
r
k
e
t
v
a
l
u
e
A
v
e
r
a
g
e
m
a
r
k
e
t
v
a
l
u
e
P
o
s
i
t
i
v
e
N
e
g
a
t
i
v
e
P
o
s
i
t
i
v
e
N
e
g
a
t
i
v
e
2013 2012 2013 2012 2013 2012 2013 2012
Foreign-exchange contracts
Spot, purchase 1,925
119
20
546
203
113
2,932
Spot, sale
Forward transactions/
futures, purchase 9,737
16
16,843
247
14,843
131
13,646
116
15,492
147
25,534
138
14,104
266
10,263
Forward transactions/
futures, sale 39,970
32,756
7,553
12,250
35,318
34,903
9,844
16,594
Swaps 15,131
Options, purchase
Options, sale
43,057
10,664
21,269
25,522
38,472
17,165
23,388
Interest-rate contracts
Spot, purchase 1,919
1,823
626
1,032
1,197
1,043
1,084
1,129
Spot, sale 839
Forward transactions/
futures, purchase 5
507
212
4,168
19
2,058
844
155
846
307
2,160
115
1,228
64
Forward transactions/
futures, sale 339
528
2,795
1,219
868
179
1,562
1,021
Swaps 47,015
64,339
57,907
77,173
59,748
77,363
69,974
72,198
Options, purchase 11,348
Options, sale
11,312
11,349
11,312
12,541
14,130
12,542
14,130
Share contracts
Spot, purchase 1,068
211
319
475
1,621
769
1,018
436
Spot, sale 326
Forward transactions/
futures, purchase 171
499
31
1,048
9
189
3,211
250
451
35
1,576
29
746
48
Forward transactions/
futures, sale 8
172
31
29
12
250
35
Other derivative contracts
Credit Default Swaps 1,087
931
1,189
316
348
Total 130,888
Provision of security under
CSA agreements
172,253
111,719
-75,372
141,736
-86,101
158,647
194,394
131,990
144,826
Total other assets/
other liabilities 130,888
172,253
36,347
55,635
All contracts of derivative financial instruments are non-guanteed contracts.
Summary (DKK 1,000)
Profit and loss account
Interest receivable
2013
776,268
2012
834,021
2011
858,257
2010
836,339
2009
993,756
Interest payable
146,037
200,764
245,291
241,954
377,728
Net income from interest
630,231
633,257
612,966
594,385
616,028
Dividend on capital shares etc.
12,610
1,463
1,111
1,219
3,243
Income from fees and commissions
229,813
210,516
158,303
170,389
149,628
Fees and commissions paid
31,123
24,029
24,312
25,996
23,823
Net income from interest and fees
841,531
821,207
748,068
739,997
745,076
Value adjustments
+23,074
+46,957
+16,386
+52,159
+58,130
Other operating income
2,730
3,303
4,535
3,893
5,351
Staff and administration costs
254,909
252,796
244,068
236,374
235,604
Amortisations, depreciations and write-
downs on intangible and tangible
assets
4,270
3,233
4,375
3,219
2,424
Other operating costs
28
133
381
195
56
Costs bank packages and
Deposit Guarantee Fund
16,091
10,281
11,178
46,590
55,785
Impairment charges for loans and
other debtors etc. -120,175 -156,844 -128,799 -138,217 -158,600
Impairment charges for national
bank package I etc. 0 0 0 -33,152 -51,173
Result of capital shares in associated
companies -3 +5 +11 +14 -59
Profit before tax 471,859 448,185 380,199 338,316 304,856
Tax 114,199 120,188 94,128 81,443 72,775
Profit after tax 357,660 327,997 286,071 256,873 232,081
Summary (DKK 1,000) End 2013 End 2012 End 2011 End 2010 End 2009
Balance sheet
Assets
Cash in hand and claims on credit
institutions and central banks 479,977 856,488 1,348,253 2,714,304 2,534,722
Loans and other debtors at
amortised cost price 13,849,285 12,424,139 12,746,560 13,151,216 13,047,212
Securities 4,878,969 4,013,342 3,005,504 1,804,062 1,936,663
Tangible assets 78,256 79,811 79,615 80,092 79,644
Other assets 296,334 307,766 369,091 497,530 329,715
Total assets 19,582,821 17,681,546 17,549,023 18,247,204 17,927,956
Liabilities and equity
Debt to credit institutions and
central banks
Term to maturity under 1 year 750,834 414,472 387,432 731,968 699,732
Term to maturity over 1 year 1,004,050 783,599 854,643 1,900,222 2,294,991
Deposits and other debts 14,113,816 12,866,748 12,755,415 11,661,654 11,187,470
Issued bonds 249,814 340,809 338,958 337,617 557,337
Other liabilities 174,723 191,035 301,996 593,153 365,021
Provisions for liabilities 17,444 26,109 14,973 13,247 72,238
Subordinated debt 371,040 382,634 412,486 696,999 695,394
Share capital 24,200 24,700 25,200 25,200 25,200
Reserves 2,876,900 2,651,440 2,457,920 2,287,144 2,030,573
Total shareholders’ equity 2,901,100 2,676,140 2,483,120 2,312,344 2,055,773
Total liabilities and equity 19,582,821 17,681,546 17,549,023 18,247,204 17,927,956
Contingent liabilities etc.
Contingent liabilities
1,901,934
1,667,100
1,052,222
1,041,983
1,485,676
Total contingent liabilities etc.
1,901,934
1,667,100
1,052,222
1,041,983
1,485,676
Solvency:
2013 2012 2011 2010 2009
Solvency ratio % 20.0 22.4 21.4 22.4 20.2
Tier 1 capital ratio % 19.2 20.9 19.8 18.6 16.6
Earnings:
Return on equity before tax % 16.9 17.4 15.9 15.5 15.9
Return on equity after tax % 12.8 12.7 11.9 11.8 12.1
Income/cost ratio DKK 2.19 2.06 1.98 1.74 1.61
Market risk:
Interest rate risk % 0.6 0.6 0.7 0.1 0.6
Foreign exchange position % 1.6 0.6 0.9 0.5 3.4
Foreign exchange risk % 0.6 0.0 0.0 0.0 0.1
Liquidity risk:
Excess cover relative to statutory
liquidity requirement % 166.2 185.5 140.5 231.8 205.6
Loans and impairments thereon
relative to deposits % 104.2 102.4 105.0 117.6 120.8
Credit risk:
Loans relative to shareholders’ equity 4.8 4.6 5.1 5.7 6.3
Growth in loans for the year % 11.5 -2.5 -3.1 0.8 -6.1
Total large exposures % 35.0 27.2 11.8 0.0 0.0
Cumulative impairment percentage % 5.1 5.1 4.5 3.8 3.1
Impairment percentage for the year % 0.72 1.06 0.89 0.94 1.16
Proportion of debtors at reduced interest % 0.5 0.8 0.4 0.4 0.4
Share return:
Profit for the year after tax per share*/*** DKK 1,462.8 1,314.6 1,135.2 1,019.3 921.0
Book value per share*/** DKK 12,145 11,049 10,055 9,193 8,172
Dividend per share* DKK 500 280 260 240 0
Share price relative to profit for
the year per share*/*** 15.0 11.7 10.2 14.2 13.2
Share price relative to book value per share*/** 1.81 1.39 1.15 1.58 1.49
* 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 items.
Tier 1 capital ratio
Tier 1 capital after deductions (incl. hybrid core capital) in per cent of total risk weighted items.
Return on equity before tax
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 tier 1 capital after deductions (incl. hybrid core capital).
Foreign exchange position
Foreign exchange indicator 1 in per cent of tier 1 capital after deductions (incl. hybrid core capital).
Foreign exchange risk
Foreign exchange indicator 2 in per cent of tier 1 capital after deductions (incl. hybrid core capital).
Excess coverage relative to statutory liquidity requirement
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 impairments thereon relative to deposits
Loans + impairments 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 impairment percentage
Impairment charges for loans and provisions for losses on guarantees in per cent of loans + impairment
charges for loans + guarantees + provisions for losses for guarantees.
Impairment percentage for the year
Impairment charges etc. for the year in per cent of loans + impairment charges for loans + guarantees + provi-
sion for losses on guarantees.
Proportion of debtors at reduced interest
Proportion of debtors at reduced interest before impairment charges etc. in per cent of loans + impairment
charges for 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 90
OTHER INFORMA TION
Page
94 Shareholders’ committee
95 Board of directors
101 General management
102 Company information
103 Stock exchange reports
103 Financial calendar
104 The bank’s branches etc.
Shareholders’ committee
Jens Møller Nielsen, manager, Ringkøbing, - born on 25 August 1956
chairman of the shareholders’ committee
Else Kirkegaard Hansen, senior master, Ringkøbing, - born on 26 August 1954
deputy chairman of the shareholders’ committee
Hejne F. Andersen, industrialist, Ringkøbing - born on 30 August 1954
Jens Arnth-Jensen, manager, Holte - born on 9 June 1948
Gert Asmussen, printer, Tarm - born on 14 April 1950*
Inge Sandgrav Bak, financial manager, Ringkøbing - born on 31 July 1960*
Claus H. Christensen, farmer, Lem - born on 25 February 1961
Claus Dalgaard, manager, Ringkøbing - born on 28 April 1962
Per Dam, accountant, Ulfborg - born on 27 February 1952
Ole K. Erlandsen, butcher, Herning - born on 19 December 1962
Niels Ole Hansen, manager, Ringkøbing - born on 1 September 1951
Tonny Hansen, college principal, Ringkøbing - born on 27 May 1958
Leif Haubjerg, farmer, No - born on 18 December 1959
Erik Jensen, manager, Skjern - born on 7 September 1965
Niels Esper Kamp, farmer, Stadil - born on 30 September 1957
Jens Lykke Kjeldsen, timber merchant, Ringkøbing - born on 2 September 1950*
Gravers Kjærgaard, farmer, Grønbjerg - born on 12 August 1952*
Jacob Møller, CEO, Ringkøbing - born on 2 August 1969
Lars Møller, municipal chief executive, Holstebro - born on 30 November 1957
Martin Krogh Pedersen, CEO, Ringkøbing - born on 7 June 1967*
Ole Christian Pedersen, manager, Vostrup - born on 15 February 1950
Kristian Skannerup, industrialist, Tim - born on 14 June 1959
Lone R. Søllmann, financial manager, Tarm - born on 26 January 1968
Egon Sørensen, insurer, Spjald - born on 16 June 1965
Jørgen Kolle Sørensen, car dealer, Hvide Sande - born on 17 September 1970
Johan Chr. Øllgaard, industrialist, Stauning - born on 10 June 1947
* Member of the board of directors
BOARD OF DIRECTORS
Board of directors
Jens Lykke Kjeldsen, timber merchant, Ringkøbing, chairman of the board of directors
Born on 2 September 1950
Member of the board of directors since 1995
End of current term of election to the board of directors: 2016
Other managerial activities - member of the 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
Martin Krogh Pedersen, CEO, Ringkøbing, deputy chairman of the board of directors
Born 7 June 1967
Independent
Member of the board of directors since 2011
End of current term of election to the board of directors: 2015
Other managerial activities - member of the management of:
A/S Maskinfabrikken PCP
Ejendomsselskabet Ringkøbing ApS
Elefantriste A/S
K. P. Components Inc.
K. P. Holding A/S
K. P. Komponenter A/S
PF Group A/S
MHKP Holding ApS
MHKPO Holding ApS
MHKPS Holding A/S
Gert Asmussen, printer, Tarm
Born on 14 April 1950
Independent
Member of the board of directors since 2002
End of current term of election to the board of directors: 2014
Other managerial activities - member of the 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
Inge Sandgrav Bak, financial manager, Ringkøbing
Born on 31 July 1960
Independent
Member of the board of directors since 2011
End of current term of election to the board of directors: 2015
Other managerial activities - member of the management of:
International A/S
JSB Composite (Zhuozhou) Co., Ltd.
Rindum ApS
Gravers Kjærgaard, farmer, Grønbjerg
Born on 12 August 1952
Independent
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
Jørgen Lund Pedersen, manager, Skanderborg
Born on 7 October 1949
Independent
Member of the board of directors since 2013
End of current term of election to the board of directors: 2017
Other managerial activities - member of the management of:
Løvbjerg Fonden
Bo Bennedsgaard, IT consultant, Holstebro, elected by the employees
Born on 23 January 1972
Member of the board of directors since 2007
End of current term of election to the board of directors: 2015
No other managerial activities
Gitte Elisa Sigersmunda Høgholm Vigsø, adminstrative employee, Holstebro, elected by the
employees
Born on 24 April 1976
Member of the board of directors since 2011
End of current term of election to the board of directors: 2015
No other managerial activities
Board committees
The board of directors has appointed an audit committee, a risk committee, a nomination committee
and a remuneration committee.
Find below subsequent information about the individual committees.
Audit committee
The following are members of the audit committee:
• Gert Asmussen, chairman of the committee
• Jens Lykke Kjeldsen
• Martin Krogh Pedersen
• Inge Sandgrav Bak
• Gravers Kjærgaard
• Jørgen Lund Pedersen
• Bo Bennedsgaard
• Gitte E. S. Vigsø
Gert Asmussen is the specially qualified member of the audit committee. Given the bank’s size and
complexity and Mr Asmussen’s education and professional experience, the bank’s board of directors
judges that Mr Asmussen possesses the qualifications required pursuant to the Danish “Executive order
on audit committees in companies and groups subject to the supervision of the Danish Financial Super-
visory Authority”.
The bank’s board of directors has agreed on a business procedure for the audit committee which in-
clude provisions on the committee’s constitution and objective, members, meetings, powers etc., tasks,
reporting and self-assessment.
The audit committee is responsible for the following tasks:
• Monitoring of the financial statements process.
• Monitoring whether the company’s internal control system, risk management systems and any
internal auditing are effective.
• Monitoring of the statutory auditing of the annual financial statements etc.
• Monitoring and checking the auditor’s independence pursuant to Section 24 of the Danish Act on
approved auditors and audit firms, including in particular the delivery of additional services to the
company.
• Recommendation on election of auditors to the board of directors.
Risk committee
The following are members of the risk committee:
• Jens Lykke Kjeldsen, chairman of the committee
• Martin Krogh Pedersen
• Gert Asmussen
• Inge Sandgrav Bak
• Gravers Kjærgaard
• Jørgen Lund Pedersen
• Bo Bennedsgaard
• Gitte E. S. Vigsø
The bank’s board of directors has agreed on a business procedure for the risk committee which include
provisions on the area of application and objective, members and constitution, tasks, meetings, powers
and resources, reporting and minutes of meeting, announcements, assessment and self-assessment, as
well as changes to the business procedure.
The risk committee is responsible for the following tasks:
• Advise the board of directors on the company’s general existing and future risk profile and strategy.
• Assist the board of directors with ensuring that the board’s risk strategy is implemented correctly in
the organisation.
• Assess whether the financial products and services traded by the bank are in accordance with the
bank’s business concept and risk profile, including whether the earnings on the products and ser-
vices reflect the associated risks, and prepare proposals for remedies if the products or services and
the associated earnings are not in accordance with the bank’s business concept and risk profile.
• Assess whether the incentive components of the bank’s remuneration structure take account of the
bank’s risks, capital, liquidity and the probability and time of payment of remuneration (under the
bank’s remuneration policy, no forms of incentive components are used in the bank).
Nomination committee
The following are members of the nomination committee:
• Jens Lykke Kjeldsen, chairman of the committee
• Martin Krogh Pedersen
• Gert Asmussen
• Inge Sandgrav Bak
• Gravers Kjærgaard
• Jørgen Lund Pedersen
• Bo Bennedsgaard
• Gitte E. S. Vigsø
The bank’s board of directors has agreed on a business procedure for the nomination committee which
include provisions on the area of application and objective, members and constitution, tasks, meetings,
powers and resources, reporting and minutes of meetings, announcements, assessment and self-assess-
ment, as well as changes to the business procedure.
The nomination committee is responsible for the following tasks:
• Prepare proposals and recommendations in connection with election and re-election of members to
the bank’s shareholders’ committee and board of directors and appointment of the bank’s general
management.
• Regularly and minimum once a year assess the board of directors’ size, structure, composition and
results with respect to their tasks and report and make recommendations for possible changes
thereon to the full board of directors.
• Regularly and minimum once a year assess whether the full board of directors has the required
combination of knowledge, professional skills, diversity and experience, and whether the individual
member meets the requirements of Section 64 of the Danish Financial Business Act, and report and
make recommendations for possible changes thereon to the full board of directors.
• Regularly and minimum once a year evaluate the bank’s executive board and make recommenda-
tions thereon to the board of directors.
• Regularly review the board of directors’ policy for selection and appointment of members to the
general management if such a policy was prepared, and make recommendations thereon to the
board of directors.
• Set a target figure for the percentage of the under-represented gender on the board of directors
and prepare a policy on how to reach the figure.
• Prepare a policy for diversity on the board of directors.
Remuneration committee
The following are members of the remuneration committee:
• Jens Lykke Kjeldsen, chairman of the committee
• Martin Krogh Pedersen
• Gitte E. S. Vigsø
The bank’s board of directors has agreed on a business procedure for the remuneration committee
which include provisions on the area of application and objective, members and constitution, tasks,
meetings, powers and resources, reporting and minutes of meeting, announcements, assessment and
self-assessment, as well as changes to the business procedure.
The remuneration committee is responsible for the following tasks:
• Negotiation and making agreements with the general management on remuneration of the general
management.
• Assess the need for changes to the bank’s remuneration policy, and, if deemed necessary, prepare
and recommend draft changes to the policy for approval by the board of directors prior to adoption
by the general meeting.
• Prepare and recommend draft guidelines for the board of directors’ monitoring of compliance with
the remuneration policy etc. for approval by the board of directors, including ensuring that compli-
ance with the policy is monitored.
• Monitoring remuneration of the management of the part of the organisation in charge of moni-
toring the limits of risk-taking, and the management of the part of the organisation otherwise in
charge of monitoring and auditing, including the management of the compliance function and the
chief internal auditor.
In general, in cases where a committee consists of the bank’s full board of directors, both the commit-
tee and the board of directors treatment may in some cases take place simultaneously.
Board of directors - competencies
The members of the bank’s board of directors together possess all the competencies required for the
overall management of the bank on the basis of the business concept for the bank’s operations.
The members of the bank’s full board of directors thus possess competencies concerning:
• The business concept and various related matters
• Credit risks and various related matters
• Market risks and various related matters
• Liquidity risks and various related matters
• Operational risks and various related matters
• Budgets, accounting and auditing
• Capital matters consisting of capital adequacy and solvency requirement
• Insurance risks
• Risk management including interdisciplinary risk management
• General managerial experience
• Managerial experience from other financial companies
• Legal insight, including in relation to financial legislation
We advise as follows concerning the individual board members’ special competencies within specific
areas:
• Jens Lykke Kjeldsen has special competencies, knowledge and experience within the areas of the
business concept, liquidity risks, insurance risks, risk management and general managerial experi-
ence and within sections of the credit risk and market risk areas.
• Martin Krogh Pedersen has special competencies, knowledge and experience within the areas of
the business concept, market risks, budgets, accounting and auditing, insurance risks and general
managerial experience and within sections of the credit risk area.
• Gert Asmussen has special competencies, knowledge and experience within the areas of the busi-
ness concept, credit risks, budgets, accounting and auditing and general managerial experience and
within a section of the market risk area. As the chairman of the bank’s audit committee, Gert Asmus-
sen has qualifications within accounting/auditing.
• Inge Sandgrav Bak has special competencies, knowledge and experience within the area of budgets,
accounting and auditing and within sections of the business concept and credit risk areas.
• Gravers Kjærgaard has special competencies, knowledge and experience within the areas of the
business concept, budgets, accounting and auditing and within sections of the credit risk, market
risk and liquidity risk areas.
• Jørgen Lund Pedersen has special competencies, knowledge and experience within the areas of the
business concept, credit risks, market risks, liquidity risks, operational risks, capital, risk manage-
ment, managerial experience from other financial companies, general managerial experience and
legal insight.
• Bo Bennedsgaard has special competencies, knowledge and experience within the area operational
risks and within a section of the credit risk area.
• Gitte E. S. Vigsø has special competencies, knowledge and experience within the area legal insight
and within section of the business concept and credit risk areas.
Holdings of Ringkjøbing Landbobank shares by members of the board of
directors
Reference is made to note 32 on page 73 for information on holdings of Ringkjøbing Landbobank shares
by members of the board of directors.
General management
John Bull Fisker, CEO
Born on 3 December 1964
Member of the general management since 1999
On the board of directors of the following companies:
Chairman of Letpension A/S, Copenhagen
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 PRAS A/S, Copenhagen
Member of the customer board of:
PFA Pension A/S, Copenhagen
Holdings of Ringkjøbing Landbobank shares by the general management
Reference is made to note 32 on page 73 for information on holdings of Ringkjøbing Landbobank shares
by members of the general management.
Ringkjøbing Landbobank Aktieselskab
Torvet 1
DK-6950 Ringkøbing
Denmark
Founded: 1886
Phone: +45 9732 1166
Telefax: +45 7624 4913
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 24.2 million in 4,840,000 shares of DKK 5.
Ownership
16.859 shareholders were registered at end of 2013, this represents 97.5 percent of the
nominal share capital.
Major shareholders
Two shareholders have advised their holding of at least 5% of Ringkjøbing Landbobank’s
share capital:
ATP, Hillerød, Denmark
Parvus Asset Management (UK) LLP, London, United Kingdom
Stock exchange reports 2013
Review of Ringkjøbing Landbobank’s reports to NASDAQ OMX Copenhagen and others
in 2013:
02 January 2013 Large shareholders
30 January 2013 Annual accounts for 2012
30 January 2013 Annual report for 2012
30 January 2013 Agenda for the annual general meeting
28 February 2013 Minutes of the annual generel meeting the 27 February 2013
28 February 2013 Election to the board of directors
12 March 2013 Updated Articles of Association
24 April 2013 Quarterly report 1st quarter 2013
30 April 2013 Implementation of capital reduction
30 April 2013 Updated Articles of Association
30 April 2013 Voting rights
23 May 2013 Constitution of the board of directors
07 August 2013 Interim report for the 1st half 2013
23 October 2013 Quarterly report 1st - 3rd quarter 2013
23 October 2013 Financial calender for 2014
Reports regarding insiders’ transactions with the Ringkjøbing Landbobank share from
executive employees and their closely related do not emerge from the above review.
All the reports from the bank to NASDAQ OMX Copenhagen and others can be seen on
the bank´s website: www.landbobanken.com.
FINANCIAL CALENDAR
Financial calendar 2014
The financial calendar for the upcoming publications is as follows:
26 February 2014 Annual general meeting
23 April 2014 Quarterly report, 1st quarter 2014
06 August 2014 Interim report 2014
22 October 2014 Quarterly report, 1st - 3rd quarters 2014
Head office:
Ringkøbing
Branches:
Herning
Holstebro
Hvide Sande
Lem
Spjald
Tarm
Ulfborg
Viborg
Vildbjerg
Private Banking branches:
Herning
Holte
Ringkøbing
Aarhus
John Bull Fisker
CEO
Jørn Nielsen
Assistant general manager
Lars Hindø
Executive assistant
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 7624 4913
E-mail
post@landbobanken.dk
SWIFT
RINGDK22
CVR-no.
37 53 68 14
