DJ DGAP-UK-Regulatory: Annual Report 2011, Ringkjoebing Landbobank A/S
Ringkjoebing Landbobank A/S / Annual Financial Report
01.02.2012 08:33
Dissemination of a UK Regulatory Announcement, transmitted by
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The issuer is solely responsible for the content of this announcement.
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Please visit www.landbobanken.com to download the Annual Report 2011 in pdf.
Disclaimer: >>The following is a translation of a Danish original document.
The
original Danish text shall be the governing text for all purposes and in case
of any discrepancy the Danish wording shall be applicable.<<
DEAR SHAREHOLDER
The year 2011 saw both upswings and downturns in the economy. The tone at the
beginning of the year was still optimistic in the belief that growth was
rising, but this development turned around again when the debt crisis in Europe
fl ared up before the summer holiday season, and doubts arose about the
stability of the euro. Major cutbacks in public budgets were thus implemented
throughout the year both in Denmark and abroad, which put a damper on growth
and stimulated an increase in private savings. We must also prepare ourselves
for a period of low growth rates in the economy in the years to come.
Against this background, we are well satisfi ed with the year's pre-tax profi t
of DKK 380 million, an increase of 12%. This profit equates to a 17% return on
the bank's equity. The bank's core earnings were DKK 390 million, at the top of
the range reported at the beginning of the year.
Notwithstanding the improvement in the bank's results, the share price fell by
18% after adjustment for the dividend which was paid. It is of course only a
minor consolation that this is a fine result in the context of the financial
sector as a whole, as the index for financial shares fell by 32% in Denmark.
The recommendation to the general meeting is that the dividend be increased to
DKK 13 per share and that we continue with a new buy-back programme for 100,000
shares.
The bank's rate of costs was 32%, meaning that we still retain our position as
the Danish bank with the lowest costs per krone earned. We are pleased with
this situation because it provides a high level of robustness in the bank's
results when times are uncertain. This will be cause for happiness among all
our interested parties.
Robustness, profi t and capital adequacy have again become important for our
customers and their choice of bank. We have noted this in the past year, when
we gained many new deposit customers. We are therefore well satisfi ed with the
bank's solid capitalisation. The bank's capital adequacy ratio is 21%, and this
must be viewed in relation to a statutory requirement of 8%, thus giving a
solvency cover of 268%. This high solvency and the bank's earnings mean that
Ringkjoebing Landbobank is one of Denmark's most solid banks, meaning that we
possess the strength required to support our customers and their sound
investments.
Ringkoebing Landbobank has not needed to draw on state capital or liquidity, and
we have therefore saved the interest costs associated with these support
schemes. These support schemes will be phased out in the years to come,
together with the introduction of a requirement that banks must have a greater
equity to support their operations. Our bank is already in place with respect
to these higher capital requirements, which we believe will give us a
competitive edge in the years to come, where we would like to increase our
market share even more.
The bank's result and our sound foundation are also attributable to our
competent employees, who have again done a fantastic job this year. Their
expertise, reliability, loyalty and fi ghting spirit are an unrivalled
combination.
The year 2012 is expected to be interesting. There will be a higher than normal
level of uncertainty concerning economic developments. We expect core earnings
in the range DKK 300-400 million, which must be adjusted by the result for the
trading portfolio and any costs payable to the Deposit Guarantee Fund.
Finally, we would like to thank our customers and shareholders for the high
level of support given to the bank.
Bent Naur John Bull Fisker
ANNUAL REPORT - HIGHLIGHTS
-- Increase of 12% in pre-tax profi t from DKK 338 million to DKK 380 million
-- The profi t is equivalent to a return on equity of 17% after payment of
dividend
-- The rate of costs was computed at 32.4%, still the lowest in the country
-- Substantial increase in deposits of 9% and a fall of 3% in loans, such that
there is now balance
-- Capital adequacy ratio of 21.4%, equivalent to cover of 268%
-- Core capital ratio of 19,8%
-- The bank's market value is DKK 3.3 billion
-- Highly satisfactory increase in customers in both branch network and
Private Banking
-- Payment of dividend of DKK 13 per share, equivalent to DKK 66 million
-- Recommendation to the general meeting that 100,000 bought back shares be
cancelled
-- Proposal for a new buy-up programme for 100,000 shares, equivalent to
approx. DKK 66 million
-- Expectations of core earnings for 2012 in the DKK 300-400 million range
-- The CEO Bent Naur will retire at the end of April 2012
FIVE YEAR SUMMARY
2011 2010 2009 2008 2007
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Main figures for the bank (million DKK)
Total core income 767 758 753 735 696
Total costs and depreciations -248 -240 -238 -239 -234
Core earnings before write-downs on 519 518 515 496 462
loans
Write-downs on loans etc. -129 -138 -159 -77 +11
Core earnings 390 380 356 419 473
Result for portfolio +1 +38 +56 -73 -18
Costs bank package I and Deposit -11 -80 -107 -28 0
Guarantee Fund
Profit before tax 380 338 305 318 455
Profit after tax 286 257 232 240 348
Shareholders' equity 2,483 2,312 2,056 1,785 1,779
Total capital base 2,818 2,943 2,747 2,458 2,110
Deposits 12,755 11,662 11,187 9,073 9,162
Loans 12,747 13,151 13,047 13,897 14,135
Balance sheet total 17,549 18,247 17,928 18,002 19,634
Guarantees 1,052 1,042 1,486 2,386 4,804
Key figures for the bank (per cent)
Pre-tax return on equity, beginning of 16.9 16.5 17.1 19.6 29.3
year
Return on equity after tax, beginning of 12.7 12.5 13.0 14.7 22.4
year
Rate of costs 32.4 31.6 31.6 32.4 33.7
Core capital ratio 19.8 18.6 16.6 13.0 11.2
Solvency ratio 21.4 22.4 20.2 16.3 13.0
Key figures per 5 DKK share (DKK)
Core earnings 79 75 71 83 94
Profit before tax 77 67 60 63 90
Profit after tax 58 51 46 48 69
Net asset value 489 459 408 354 353
Price, end of period 579 725 609 310 858
Dividend 13 12 0 0 30
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MANAGEMENT REPORT
Financial review
The bank's profit increased by 12% from DKK 338 million to DKK 380 million in
2011.
The result is equivalent to a return on equity of 17%, which is considered
highly satisfactory in light of the present economic situation in society.
The core earnings increased by 3% to DKK 390 million, which is at the top of
the range reported at the beginning of the year. The range was most recently
adjusted upwards in October 2011 to DKK 350-400 million.
Core income
The total core income was 1% higher in 2011, with an increase from DKK 758
million in 2010 to DKK 767 million in 2011.
Net interest income was DKK 607 million in 2011, an increase of 4% compared to
last year. An up-ward trend was seen during the year in the net interest
income, which derives from the increasing deposit fi gures and a increasing
interest margin. Like the rest of the fi nancial sector, the bank increased the
interest margin in 2011. The very low interest level is pulling in the opposite
direction as it results in a lower return on the bank's portfolio of securities
and cash resources.
4th qtr 3rd qtr 2nd qtr 1st qtr 4th qtr 3rd qtr 2nd qtr 1st qtr
Million DKK 2011 2011 2011 2011 2010 2010 2010 2010
Net interest income 163 154 150 140 139 144 150 150
Fees, commissions and foreign exchange earnings amounted to net DKK 152 million
in 2011 against net DKK 167 million in 2010, a fall of 9%. The year was
characterised by low trading and conversion activity within securities trading
and asset management, and the larger volumes therefore did not result in a
corresponding increase in income.
The activity on the housing market was also low, with fewer transactions and
conversions.
Net fees and commissions and foreign exchange income were derived as follows:
Million DKK 2011 2010
Asset management 50 52
Securities trading 19 26
Guarantee commissions 35 31
Foreign exchange income 18 23
Payment handling 17 17
Loan fees 6 8
Other fees and commissions 7 10
Total 152 167
Earnings from sector shares amounted to DKK 4 million in 2011 and is thus on a
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DJ DGAP-UK-Regulatory: Annual Report 2011, -2-
par with last year. These earnings derive from DLR Kredit A/S, BankInvest Holding A/S, SparInvest Holding A/S, EgnsInvest Holding A/S, Letpension Holding A/S, Nets Holding A/S, Swift, Multidata Holding A/S, Vaerdipapircentralen A/S, Bankernes Kontantservice A/S, PRAS A/S and Bankdata, and are typically an expression of the changes in value in the companies. Costs and depreciations Total costs including depreciations on tangible assets amounted to DKK 248 million in 2011, 4% higher than last year. The rate of costs was computed at 32.4%, still the lowest in the country. A low rate of costs is especially important in periods of difficult economic conditions as the bank's results are thus very robust, which is also refl ected in the computation of the bank's individual solvency requirement. Write-downs on loans Write-downs on loans showed a fall of 7% to net DKK 129 million in 2011 against DKK 138 million last year. The write-downs are equivalent to 0.9% of the total average of loans, write-downs, guarantees and provisions. The bank's customers appear to be coping better with the weak economic conditions than the average in Denmark. The present level of write-downs is considered satisfactory. The bank's total account for write-downs and provisions amounted to DKK 650 million at the end of the year, equivalent to 4.5% of total loans and guarantees. Actual writedowns on loans (including interest on the account for write-downs) continue to be low at a mere DKK 43 million, such that the account for write-downs and provisions increased by net DKK 85 million during the year. The portfolio of loans with zeroed interest amounts to DKK 61 million, equivalent to 0.43% of the bank's total loans and guarantees at the end of the year. This is at the same level as last year. Given the low growth in the Danish economy also in 2011, which is expected to continue in 2012, the bank is satisfi ed with the conservative credit policy on the basis of which the bank has always operated. As a natural part of the economic cycle, the bank's losses are expected to remain at a relatively high level in 2012, but with a continued slightly downward trend relative to the previous three years. It is also still the bank's judgment that the credit policy, the diversifi ed loans portfolio and the bank's location in Central and West Jutland will have a positive effect on the bank compared to the general level of losses in the banking sector as a whole. Core earnings Million DKK 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Total core income 767 758 753 735 696 609 511 417 368 328 Total costs etc. -248 -240 -238 -239 -234 -208 -190 -184 -163 -155 Core earnings before write-downs on loans 519 518 515 496 462 401 321 233 205 173 Write-downs on loans -129 -138 -159 -77 +11 +69 +5 +4 -10 +6 Core earnings 390 380 356 419 473 470 326 237 195 179 Core earnings were DKK 390 million against last year's DKK 380 million, an increase of 3%. Income in 2011 proved to be so stable that the expectations for core earnings were adjusted upward to the DKK 350-400 million range in October 2011, and the final result is at the top of this range. Result for portfolio The result for the portfolio for 2011 was positive by DKK 1.5 million, including funding costs for the portfolio. The bank's holding of shares etc. at the end of the year amounted to DKK 249 million, DKK 12 million of which was in listed shares etc. while DKK 237 million was in sector shares etc. The bond portfolio amounted to DKK 2,756 million, and the great majority of the portfolio consists of AAA-rated Danish mortgage credit bonds and bonds guaranteed by the Danish government, or short-term bank bonds. The total interest rate risk, computed as the impact on the result of a one percentage point change in the interest level, was 0.7% of the bank's Tier 1 capital after deduction at the end of the year. The bank's total market risk within exposure to interest rate risk, exposure in listed shares etc. and foreign exchange exposure 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 2011: Value at Risk Risk relative to equity Risk in million DKK end of year in % Highest risk of loss: 21.1 0.85% Lowest risk of loss: 1.7 0.07% Average risk of loss: 8.4 0.34% The bank's policy remains to keep the market risk at a low level. Profit after tax The result after tax was DKK 286 million for the year against DKK 257 million last year. The result after tax is equivalent to a return on equity of 13% after payment of dividend. The balance sheet The bank's balance sheet total at the end of the year stood at DKK 17,549 million against last year's DKK 18,247 million. Deposits increased by 9% from DKK 11,662 million to DKK 12,755 million. The bank's loans decreased by 3% to DKK 12,747 million. The underlying growth in new customers from the branch network and within the niches Private Banking and wind turbine fi nancing remains good. However, the changed consumption pattern with a higher savings ratio and the general trend that many customers are deleveraging are generally resulting in greater repayments on the bank's existing loans portfolio than previously, and the entire growth in 2011 was therefore used to neutralise these repayments. The bank's portfolio of guarantees at the end of the year was DKK 1,052 million against DKK 1,042 million in 2010. Liquidity The bank's liquidity is good, and since the banks loans and deposits are at the same level, we made early repayments in the second half-year of 2011 of long-term loans to the equivalent of DKK 1,063 million to optimise the bank's liquidity. The excess solvency compared to the statutory requirements was 141%. The bank's short-term funding with term to maturity of less than 12 months amounts to only DKK 390 million, balanced by DKK 4.1 billion in short-term money market placing, primarily in Danish banks and liquid securities.The bank is thus not dependent on the short-term money market. The bank's loans portfolio is more than fully fi nanced by deposits and the bank's equity. In addition, part of the German loans portfolio for wind turbines was refi nanced >>backtoback<< with KfW Bankengruppe, and the DKK 808 million in question can thus be disregarded in terms of liquidity. The bank requires no fi nancing for the coming year to meet the minimum requirement that it must always be able to manage for up to 12 months without access to the fi nancial markets. The bank's good liquidity is evident in the fi gure below, which shows the liquidity buffer for the next 36 months. The deposit guarantee scheme Ringkjoebing Landbobank has a liability to the mandatory deposit guarantee scheme in Denmark for rescuing Danish banks. The bank's share of these losses is 0.6%. Amagerbanken, Fjordbank Mors and Max Bank went bankrupt in 2011, and based on the latest available dividend rates, this cost the bank DKK 11.2 million. Rating Ringkjoebing Landbobank was rated for the fi rst time in May 2007 by the international credit rating agency Moody's Investors Service. The bank's ratings since the start are: Moody's ratings: Financial Long-term strenght liquidity Outlook 22 May 2007 C+ A1 Stable End 2007 C+ A1 Stable End 2008 C+ A1 Stable End 2009 C+ A1 Stable End 2010 C+ A1 Negative End 2011 C+ A3 Stable The bank's rating was changed to C for fi nancial strength and A3 for long-term liquidity during 2011. The amended rating came following the crashes of Amagerbanken, Fjordbank Mors and Max Bank, and covered the entire fi nancial sector. The rating was most recently confirmed in January 2012 with stable outlook. The supervisory diamond The Danish Financial Supervisory Authority has prepared a set of rules with key figures with which the bank must comply. The bank's key fi gures and the FSA's limit values are given in the table below. The key values must be complied with as of the end of December 2012. Ringkjoebing Landbobank was already in compliance with all these values by a good margin at the end of 2011. The supervisory diamond Limmit values The bank's key fi gures Stable funding < 1 0.8 Excess liquidity > 50 140.5 Major commitments < 125 41.7 Growth in loans < 20 -3.1 Exposure to the housing market < 25 11.4 Dividend and share buy-back programme The bank's board of directors will recommend to the general meeting that dividend of DKK 13 per share, equivalent to DKK 66 million, be paid for the 2011 fi nancial year. Dividend of DKK 12 was paid in 2010. In addition, 100,000 shares at a value of DKK 61 million were bought up during 2011, and a recommendation will be made to the general meeting to cancel these shares to reduce the number of shares in the bank from 5,040,000 to 4,940,000. A proposal will also be made that a new buy-back programme be established for 2012 under which up to 100,000 shares can be bought up for the purpose of cancelling them at a future general meeting. At the current price this authorisation will reduce equity by DKK 66 million. Capital The bank's equity at the beginning of 2011 was DKK 2,312 million, to which must be added the profi t for the period, and from which must be deducted dividend paid and the value of the bought-back own shares, after which the equity at the end of the year was DKK 2,483 million, an increase of 7%. The bank's capital adequacy ratio (Tier 2) was computed at 21.4% at the end of 2011. The core capital ratio (Tier 1) was computed at 19.8%. Solvency cover 2011 2010 2009 2008 2007 Core capital ratio excl. hybrid core capital (%) 18.3 17.1 15.1 11.6 10.0 Core capital ratio (%) 19.8 18.6 16.6 13.0 11.2 Solvency ratio (%) 21.4 22.4 20.2 16.3 13.0 Individual solvency requirement (%) 8.0 8.0 8.0 8.0 8.0 Solvency cover 268% 280% 253% 204% 163%
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Since 2007, the Danish fi nancial sector has been subject to a requirement that a bank's capital adequacy ratio must be at least 8%, and this ratio must also at a minimum comply with the required individual solvency requirement calculated internally by the bank, which may be higher than the 8%. If the calculated individual solvency requirement is less than 8%, a bank cannot, however, be permitted at any time to use any such calculated lower fi gure. The individual solvency requirement for Ringkjoebing Landbobank is calculated at 7.0% because of the bank's robust business model, and the ratio was thus reported at 8%. The solency need is not revised. For further information on the calculation of the individual solvency requirement of Ringkjoebing Landbobank, please see the bank's website at www.landbobanken.dk. The bank's shares The bank's share capital at the end of 2011 was DKK 25.2 million in 5,040,000 nom. five kroner shares. The bank's shares were listed on NASDAQ OMX Copenhagen at the beginning of the year at 725. The share price fell during 2011 to 579 at the end of the year and was 663 at 26 January 2012. Including dividends, an investment in the bank's shares at the beginning of 2001 has increased eightfold. This means that an investment in the bank's shares was the best bank share investment in Denmark in this period. Increase in customers The bank implemented several outreach initiatives towards new customers just under two years ago. The basis was the fact that the bank has both the liquidity and the capital to support growth, that we felt comfortable about the bank's credit facilities, and that our cost structure is suitable for the future. The biggest challenge in times of low growth in society is thus creating growth in the bank's top line. The bank's outreach initiatives will be intensified in 2012, among other things by investing in spreading the bank's Private Banking platform even further. A highly positive increase in customers is currently being seen in the branch network and within the Private Banking segment, with transfer of deposits, pension and securities customers. The growth in lending has been swallowed up by repayments on the loans portfolio. In the bank's judgment, we are, however, currently enhancing the foundation for future earnings. Expectations for earnings in 2012 The bank's core earnings for 2011 were DKK 390 million, which is at the top of the upwardly adjusted DKK 350-400 million range. Ringkjoebing Landbobank has a market share of about 50% in that part of western Jutland in which its old branches are located. The bank also has well-established branches in Herning, Holstebro and Viborg which are still operating positively. The bank's plan is to retain and develop this section of the customer portfolio with good and competitive products, focusing on employee skills and advising customers of the options in a changeable fi nancial world. Additional customers are expected to be gained in 2012 for the bank's branches in central and western Jutland as a result of the long-term recruitment initiatives and the consolidation in the sector. The activities in the bank's Distance Customer department and niche concepts, including the branch in Holte, are together also expected to continue to develop positively in the forthcoming year despite large repayments on the loans portfolio. The focus will be on servicing of the bank's current customers and further developing of the portfolio within wind turbine fi nancing, medical practitioners and affl uent customers. The expectations for the core earnings for 2012 are in the DKK 300-400 million range. To this must be added the result of the bank's trading portfolio and possible expenses for the deposit guarantee scheme. Changes in management Bent Naur has decided to retire at the end of April 2012 on the occasion of his sixty-fifth birthday. Bent Naur has been CEO of the bank since 1987. The board of directors has appointed John Bull Fisker as the new CEO as of 1 May 2012. John Bull Fisker is 47 years old and has been an employee of the bank since 1995. John Bull Fisker has been a member of the board of management since 1999. Joern Nielsen has been appointed assistant manager of the bank as of 1 March 2012. Joern Nielsen is 39 years old and has been an employee of the bank since 1993. Joern Nielsen was appointed credit controller in 1998 and credit manager in 2009. Events after the end of the financial year From the date of the balance sheet to date, no circumstances have arisen to change the assessment of the bank's annual report for 2011. Capital structure The bank's management has determined a general goal for the bank's capital, under which the bank will have a solidly based capital structure compared with both equivalent and bigger banks. It is also a goal that the bank will have adequate capital in the long term for future growth, and that there will be adequate capital to cover any regular fl uctuations in the risks which the bank has assumed. The bank's capital ratios at the end of December 2011 were as follows: Capital ratios - Core capital ratio excl. hybrid core capital 18.3% - Core capital ratio 19.8% - Solvency ratio 21.4% With respect to the calculation of the bank's Tier 1 capital, capital base and core capital ratio excluding hybrid Tier 1 capital, core capital ratio and capital adequacy ratio at the end of 2011, reference is made to the calculation of solvency requirement on page 45. The above capitalisation makes Ringkjoebing Landbobank one of the country's best capitalised banks. The bank's goal is to retain this ranking in 2012. The bank's judgment is that this can be done on the basis of the expected result for 2012. Given the solid capital position, the bank has not taken up the subordinate state capital made available under bank package II. The bank has not participated in any bank packages since bank package I expired on 30 September 2010. The bank's board of directors will recommend to the general meeting that a dividend of DKK 13 per share be paid for the 2011 fi nancial year, equivalent to DKK 66 million. The dividend paid in 2010 was DKK 12. A hundred thousand shares were also bought in 2011 to a value of DKK 61 million. The recommendation to the general meeting is that these shares be cancelled, reducing the number of shares in the bank from 5,040,000 to 4,940,000. Establishment of a new buy-back programme for 2012 will also be proposed, under which up to 100,000 shares can be bought with the object of cancellation at a subsequent general meeting. At the market price, this will authorisation will reduce the bank's equity by DKK 66 million. The maturity structure for the external subordinate capital taken up by the bank is given in the following summary. Subordinated debt - maturity structure Subordinated loan capital - Nominal EUR 27 million taken up on 30 June 2008, thirteen-year term - maturity 30 June 2021, with the option of early redemption from 30 June 2018, subject to approval by the Danish Financial Supervisory Authority. Hybrid core capital - Nominal DKK 200 million taken up on 2 March 2005, indefi nite term, with the option of early redemption from 2 March 2015, subject to approval by the Danish Financial Supervisory Authority. The bank uses the solvency rules for the calculation and statement of weighted items with credit and counterparty risk, market risk and operational risk implemented in 2007. Reference is made to the summary below for further information on the methods used by the bank concerning the various risk types. Capital adequacy computation The bank has adopted the following methods regarding the capital adequacy computation: - Credit risk outside the trading portfolio Standardised Approach - Counterparty risk Mark-to-Market Method - Credit risk reducing method - financial collaterals Comprehensive Method - Market risk Standardised Approach - Operational risk Basic Indicator Method As will be evident from the above, the bank uses the standard method for calculation of its credit risk and therewith the risk-weighted items. Fixed solvency weightings are used in this method. The method thus means that the bank has not had the same capital adequacy down-weighting as those banks which use one of the advanced methods. Conversely, neither does the bank experience increasing solvency weightings in periods of declining economic conditions. Relative to the advanced methods, the standard method thus means that there is signifi cantly greater robustness in the calculated capital percentages and less volatility in the risk-weighted items. Ringkjoebing Landbobank also focuses on its own internally calculated individual solvency requirement, defi ned as an adequate capital base as a percentage of the bank's risk-weighted items. The adequate capital base is assessed on the basis of an internal model and calculated as the amount which is appropriate to cover the bank's current and future risks. The individual solvency need was calculated at 7.0%, refl ecting the bank's solid earnings, low credit risk and modest market risks. The calculated adequate capital base is regularly reassessed and reported to the Danish Financial Supervisory Authority. The individual solvency need was reported to the FSA at 8% as the individual need, which the bank calculated at below 8%, may not be less than 8% under Section 124(4) of the Act on Financial Activities. The FSA most recently reviewed the bank's calculation of its individual solvency need in spring 2011. Reference is made to Ringkjoebing Landbobank's website, www.landbobanken.dk, for further details of the calculation of the bank's individual solvency need. Although there is a minimum solvency requirement of 8% which the bank must use, the bank still has a signifi cant excess solvency as indicated in the summary below. Solvency cover 2011 2010 2009 2008 2007
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Solvency ratio (%) 21.4 22.4 20.2 16.3 13.0 Individual solvency requirement (%) 8.0 8.0 8.0 8.0 8.0 Excess solvency (%) 13.4 14.4 12.2 8.3 5.0 Solvency cover 268% 280% 253% 204% 163% Finally, it may be concluded that throughout 2011, Ringkjoebing Landbobank has met both external and internal capital adequacy requirements, and the actual capital base has always been signifi cantly in excess of that required. Risks and risk management Ringkjoebing Landbobank is exposed to various types of risk in its operation: credit risk, market risk, liquidity risk and operational risk. The credit risk is defi ned as the risk that payment obligations to the bank are not judged to be recoverable because of either lack of ability or lack of willingness to make payment at the agreed time. The market risk is defi ned as the risk that the market value of the bank's assets and liabilities will change because of changes in market conditions. The bank's total market risk covers interest risks, currency risks, share risks and property risks. The liquidity risk is defi ned as the risk that the bank's payment obligations will not be able to be honoured under the bank's existing liquidity. Finally, the operational risk is defi ned as the risk that there will be either direct or indirect financial losses because of errors in internal processes and systems, human error, or because of external events. The bank's general policy on the assumption of risk is that the bank only assumes risks which are in accord with the business principles under which the bank is operated, and which the bank has the expertise to manage. The general policy for the management and monitoring of the various risks is that there are both central management and central monitoring as well as reporting to the bank's management and board of directors. The management and the control and reporting functions are separate, and the tasks are performed by different central staff at the bank. The bank also has a risk manager who monitors the bank's risks and reports as necessary. With the implementation of the Basel II rules in Danish law on capital adequacy requirements, Danish banks were also required to publish certain information on risk (in popular parlance also called Column 3 information). Some of the required information on risk is given in this annual report, but reference is made to the bank's website at www.landbobanken.dk for a full overview of the information which the bank must provide. The various risk types are described in more detail below. Credit risks loans Ringkjoebing Landbobank has developed over the last 10-15 years to its present status as primarily a regional bank in Central and West 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 approval that the bank has achieved a signifi cantly diversifi ed loans portfolio, including a considerable spread in terms of branches and geography. Ringkjoebing Landbobank generally assumes risks on the basis of a credit policy, the specifi ed aim of which is that there must be a well-balanced relationship between risks assumed and the return achieved by the bank, that the bank's losses must be at an acceptable level relative to the Danish financial sector, and fi nally that losses must be able to be accommodated within the bank's results, even in extreme situations. The gearing of loans relative to the bank's subordinate capital is a factor of approximately five, and the bank's goal is that the results are realised with a smaller or the same credit gearing as that of the country's major banks. In historical terms the bank has always had a healthy and conservative credit policy, and focus will remain on an effective management and monitoring of the bank's total loans portfolio via the bank's central credit department. Apart from the normal following up and management of credit in the bank's central credit department, where all major commitments are regularly reviewed and managed, the bank further developed its credit assessment models in 2011 for use in assessment of the quality of its exposure. Statistical models are used in the case of private and small business customers, while there is an expert model for major business customers. The statistical models include 7-10 different factors, including information on the customer's assets and a quantity of behavioural data. The expert model for business customers is based on information on the customer's creditworthiness and earning capacity. The bank's assessment on the basis of these models is that the quality of the credit for those loans which have not been written down is unchanged relative to 2010. The bank is, however, aware of the risks which the current market situation holds for the bank's customers, including, to a high degree, the challenge posed by a weak property market and potentially rising interest rates to the bank's private customers. The bank's customers are, however, judged to be relatively less vulnerable to these challenges, among other reasons because of a relatively low real estate burden in the bank's core area. Actual net losses In DKK 1,000 Loans with Write-downs Actual suspended on 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 *) 1987 -6,696 304 10,544 75,000 1,358,464 -0.49% 0.02% 1988 -14,205 -5,205 4,522 93,900 1,408,830 -1.01% -0.37% 1989 -18,302 -5,302 13,107 117,270 1,468,206 -1.25% -0.36% 1990 -15,867 -1,867 47,182 147,800 1,555,647 -1.02% -0.12% 1991 -11,429 3,571 47,626 170,000 1,805,506 -0.63% 0.20% 1992 -32,928 -14,928 43,325 177,900 1,933,081 -1.70% -0.77% 1993 -27,875 -6,875 30,964 208,700 1,893,098 -1.47% -0.36% 1994 -14,554 4,446 33,889 223,500 1,938,572 -0.75% 0.23% 1995 -10,806 10,194 27,292 238,800 2,058,561 -0.52% 0.50% 1996 -19,802 -1,802 18,404 233,400 2,588,028 -0.77% -0.07% 1997 -31,412 -12,412 39,846 236,600 3,261,429 -0.96% -0.38% 1998 -2,914 18,086 4,905 263,600 3,752,602 -0.08% 0.48% 1999 -442 21,558 18,595 290,450 5,148,190 -0.01% 0.42% 2000 -405 27,595 12,843 316,750 5,377,749 -0.01% 0.51% 2001 -8,038 20,962 14,222 331,950 6,113,523 -0.13% 0.34% 2002 -8,470 20,530 26,290 382,850 7,655,112 -0.11% 0.27% 2003 -22,741 2,259 23,412 394,850 8,497,124 -0.27% 0.03% 2004 -14,554 9,446 18,875 404,855 11,523,143 -0.13% 0.08% 2005 -22,908 192 35,796 357,000 15,522,264 -0.15% 0.00% 2006 -13,531 7,028 20,578 295,000 17,858,787 -0.08% 0.04% 2007 -15,264 4,888 13,190 289,097 19,227,573 -0.08% 0.03% 2008 -34,789 -10,237 22,110 356,083 16,475,975 -0.21% -0.06% 2009 -73,767 -47,658 62,649 467,025 14,890,027 -0.50% -0.32% 2010 -69,428 -40,207 66,237 565,035 14,758,234 -0.47% -0.27% 2011 -78,813 -43,073 61,419 649,856 14,448,638 -0.55% -0.30% 25-year average (1987-2011) -0.53% -0.01% 10-year average (2002-2011) -0.25% -0.05% *) Actual net losses relative to total loans, guarantees, write-downs on loans and provisions for guarantees. Explanation: The percentage losses were computed as the actual net losses for the year before and after interest on the written-down part of loans as a percentage of total loans, guarantees and write-downs on loans and provisions for guarantees. A minus sign before a percentage loss indicates a loss, while a positive percentage loss means that the interest on the written-down part of loans was greater than the actual net losses for the year. All the above fi gures are exclusive amounts regarding the national bank package I etc. RISKS AND RISK MANAGEMENT The above table documents the bank's healthy credit policy. As will be evident, the bank's average percentage loss after interest over the last 25 years (1987-2011) has been negative by 0.01%, with -0.77% (1992) as the highest percentage loss and +0.51% (2000) as the most positive fi gure. The average percentage loss before interest over the last 25 years is -0.53%, with -1.70% (1992) the highest percentage and -0.01% (1999 and 2000) the lowest. Over the last 10 years (2002-2011), the average percentage loss after interest was negative by 0.05% and before interest it was -0.25%. The bank's regional operations are run partly via branches in the bank's original core area in West Jutland and partly via branches in the three big Central and West Jutland cities of Herning, Holstebro and Viborg. The most important niches within the bank's niche division are the fi nancing of medical practitioners' purchases of private practices, a Private Banking department covering affl uent private clients, and the fi nancing of securities and loans for the fi nancing of wind turbines. Wind turbines are fi nanced for Danish fi nal investors' purchases of wind turbines erected in Denmark, Germany and France. An important common denominator for the niche loans is that the bank attempts to obtain a fi rst priority mortgage, and therewith a satisfactory security in the mortgaged assets, which is an important past of the bank's business philosophy. Concentration of credit As will be evident from the summary below, total major commitments are calculated at 41.7%. This fi gure includes two commitments with sound fi nancial institutions which were discharged in 2012. Excluding these commitments, the key fi gure for total major commitments is 11.8%, which is one commercial commitment which is covered and which has a sound credit quality. Concentration of credit 2011 2010 2009 2008 2007 Total large exposures 41.7% 10.2% 0.0% 12.1% 38.3% Explanation: The Danish Financial Supervisory Authority key fi gure >>Total large exposures<<. Geographic spread of the bank's loans and guarantee portfolio As the fi gure indicates, both the regional and niche sectors have provided a signifi cant geographic spread of the bank's loans and guarantee portfolio.
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The loans made via the bank's niche sector have also helped to ensure a considerable diversifi cation in the bank's loans portfolio, which is thus not correlated with economic conditions to the same extent as it would be if the bank were run as a purely regional bank. Credit risk on fi nancial counterparties The bank's trading in securities, foreign currency and derivatives, its loans to other banks, its possession of bonds and its processing of payments expose it to fi nancial counterparties, and therewith a credit risk, including a settlement risk. The settlement risk is the risk that the bank will not receive payment or securities in connection with the settlement of securities and/or currency transactions corresponding to the securities and/or payments which the bank has settled and delivered. The bank's board of directors grants lines of credit with respect to credit risk and settlement risk on fi nancial counterparties. When granting lines of credit, account is taken of the individual counterparty's risk profi le, rating, size and fi nancial circumstances, and there is regular follow-up on the lines of credit granted. The bank's policy is to keep the credit risk on fi nancial counterparties at a balanced level relative to the bank's size, and to deal with credit institutions of sound quality. Explanation: Distribution of the bank's loans and guarantee portfolio before write-downs and provisions by customer addresses. PA G E 2 2 R I N G K J OE B I N G L A N D B O B A N K A / S Affi liation to CLS The bank is affi liated with CLS an international clearing and settlement system which currently handles transactions in 17 currencies including Danish kroner. This has enabled the bank to reduce its credit risk on fi nancial counterparties signifi cantly. The central element in the CLS procedure is thus that the settlement of the two sides in a currency transaction occurs simultaneously in the so-called Payment versus Payment (PvP) system. In a CLS currency transaction, the parties hand over only the currency sold if they simultaneously receive the currency purchased. A further central element in the CLS settlement is that the participating parties' payments to CLS are made on a net basis and spread over three smaller payments. This provides a signifi cant reduction in the liquidity required by the participating parties. Claims on central banks and credit institutions One of the two major items in the credit risk on fi nancial counterparties is receivables in central banks and credit institutions. The bank has assumed only moderate risks on this item, and of the total receivables in central banks and credit institutions, 52% is thus due within three months. The bond portfolio The second of the two major items concerning the credit risk on fi nancial counterparties is the bank's bond portfolio. As will be evident from the fi gure below, neither has the bank assumed signifi cant risks in this item, and by far the greater part of the bond portfolio consists of AAA-rated Danish mortgage credit bonds, bonds guaranteed by the Danish state or short-term bank bonds. The bank's bond portfolio does not contain any exposure to southern European countries. RISKS AND RISK MANAGEMENT A2/A 37% Bonds distributed by rating classes Aa1/AA+ 1% Baa1/BBB+ 1% Baa2/BBB Exp. 2012 4% 21 % Exp. 2013 9 % Baa3/BBB- 1% Exp. 2014 and later 7 % Aaa/AAA 52% Not rated 4% Explanation: The bond portfolio distributed by rating classes. Ratings from the credit rating bureaus Moody's Investors Service and Standard & Poor's were used in the specifi cation. A N N U A L R E P O R T 2 0 1 1 PA G E 2 3 Market risks The bank's basic policy with respect to market risks is that the bank wishes to keep such risks at a 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 relationship 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 management. VaR is a measure of risk which describes the bank's risk under normal market conditions. An isolated VaR is calculated for interest rate, foreign exchange and listed share positions, 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 specifi c results etc. under the VaR model. Interest rate risk The bank's loan and deposit business and accounts with credit institutions are mostly entered into on a variable basis. The bank's fi xed interest fi nancial assets and liabilities are monitored continuously, and hedging transactions are entered into as needed with a consequent reduction of the interest rate risk. Ringkjoebing 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 directors and management. PA G E 2 4 R I N G K J OE B I N G L A N D B O B A N K A / S As will be evident from the fi gure, the bank has maintained a low interest risk over the last fi ve 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 ongoing 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 and reports to the board of directors and management. As in previous years, the bank's foreign exchange risk in 2011 was at an insignifi cant level. RISKS AND RISK MANAGEMENT 5 6 Interest rate risk 3 4 rcent 1 2 Per 0 jun-06 dec-06 jun-07 dec-07 jun-08 dec-08 jun-09 dec-09 jun-10 dec-10 jun-11 dec-11 Explanation: The interest rate risk shows the effect on the result as a percentage of the core capital after deductions of one percentage point change in the interest level. A N N U A L R E P O R T 2 0 1 1 PA G E 2 5 Share risk The bank co-owns various sector companies via equity interests in DLR Kredit A/S, PRAS A/S, BankInvest Holding A/S, SparInvest Holding A/S, EgnsInvest Holding A/S, Letpension Holding A/S, Nets Holding A/S, Swift, Multidata Holding A/S, Vaerdipapircentralen A/S, Bankernes Kontantservice A/S and Bankdata. These holdings are comparable with the wholly owned subsidiaries of major banks, and the equity interests are thus not deemed to be a part of the bank's share risk. The bank also holds a small portfolio of listed shares. The bank's policy is to maintain a low share risk. The daily management of the bank's share portfolio is undertaken by the securities department, while monitoring of the lines and reporting to management and the board of directors are performed by the service and support department. The bank's holding of listed shares etc. was DKK 12 million at the end of 2011 against DKK 25 million at the end of 2010. The holding of sector shares and ownership interests was DKK 237 million at the end of 2011 against DKK 232 million at the end of 2010. As will be evident from the fi gure below, the bank's share exposure (excluding sector shares and ownership interests) as a percentage of the bank's equity has been modest, thus documenting the bank's objective of maintaining a low share risk. 7 8 Share exposure 4 5 6 rcent 1 2 3 Per 0 dec-06 dec-07 dec-08 dec-09 dec-10 dec-11 Explanation: The share exposure is computed as the bank's holding of shares (excluding sector shares and other holdings) as a percentage of the shareholders' equity. PA G E 2 6 R I N G K J OE B I N G L A N D B O B A N K A / S RISKS AND RISK MANAGEMENT Property risk The bank primarily wishes to possess only properties for use in banking operations, and also to maintain minimal property risks. The bank's portfolio of both domicile and investment properties is thus quite modest relative to the bank's balance sheet total. Value at Risk The bank's total Value at Risk at the end of 2011 was DKK 13.2 million. This sum is an expression of the maximum loss in a statistical perspective which the bank could risk losing with 99% probability if all market positions were retained unchanged for a period of 10 days. VaR summary In DKK million Average Min. Max. End of year Risk VaR fi gure VaR fi gure* VaR fi gure* VaR fi gure Interest 8.2 0.3 21.5 13.5 Foreign currency 0.4 0.2 0.4 0.3 Share 4.0 2.8 3.3 2.1 Diversifi cation -4.2 -1.6 -4.1 -2.7 Total VaR fi gure 8.4 1.7 21.1 13.2 * Determined by the total VaR fi gure
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It is clear from the table that the bank's total VaR index varied during 2011 from DKK 1.7 million to DKK 21.1 million. On average, the VaR index was DKK 8.4 million, a minor increase relative to the previous year. The reader is referred to note 41 on page 69 for the VaR fi gures for the years 2009- 2011. 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 fi nancial assets etc., including different share indices, various offi cial interest rates and interest swap rates, and different exchange rate indices. By combining the historical knowledge of the covariation on the fi nancial markets with the bank's current positions, the model can calculate a risk of loss for a forthcoming ten-day period. All of the bank's interest rate positions, foreign currency positions and listed share positions etc. are included in the calculation, while positions in sector shares and unlisted ownership interests are not included. The model is unchanged relative to last year A N N U A L R E P O R T 2 0 1 1 PA G E 2 7 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 indicate 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 shortterm money market. It is thus the bank's objective that it must not be affected by a total shutdown of the money market for a period of 12 months. The bank's loan portfolio is funded primarily via four different sources, namely the bank's deposits, by taking up long-term loans with other credit institutions, via issued bonds, and fi nally via the subordinated debts taken up by the bank and the bank's equity. The bank's deposit base consists primarily of core deposits and deposits from customers with a long-term relationship with the bank. Ringkjoebing Landbobank has also entered long-term bilateral loan agreements with European banks. It should, however, be noted that the funding situation is such that the bank is not dependent on the institutions in a single country or on individual institutions. PA G E 2 8 R I N G K J OE B I N G L A N D B O B A N K A / S As will be evident from the above fi gure, the bank's short-term funding (term to maturity under one year) is supported by certifi cates of deposit with the Danish National Bank, short-term loans to other Danish banks, the bank's holding of liquid securities, and via agreements on committed credit facilities with other banks. The committed credit facilities have been entered into for long-term periods and are not normally used in everyday business. It should be noted that the excess liquidity cover at the end of 2011 was DKK 3.7 billion, whereas the equivalent fi gures at the end of 2010 and 2009 were DKK 3.3 billion and 3.8 billion respectively. An EUR 2 billion EMTN bond programme was established by the bank in 2008 to ensure diversifi cation in the funding area. The bank used the programme for the fi rst time in 2010 and issued bonds to a total of DKK 220 million. The bank also used the programme in 2011 and issued bonds tot a total of DKK 200 million. The programme thus helps to provide alternative funding sources for the bank. Deposits and other debts Distribution of funding 73% Other liabilities Issued bonds - term to maturity over 1 year Debt to credit 1% 2% institutions term to Total capital base - maturity over 1 year Debt to credit institutions - term to maturity under 1 year 5% 17% 2% In DKK 1,000 The short-term funding (term to maturity under 1 year): Issued bonds - term to maturity under 1 year 2,955 Debt to credit institutions and central banks - term to maturity under 1 year 387,431 Total 390,386 is covered as follows: Cash in hand etc. 33,935 Deposits on demand with central banks - certifi cates of deposit 186,989 Claims on credit institutions - term to maturity under 1 year 536,453 Listed bonds and listed shares etc. at current value 3,220,451 Committed credits facilities (not drawn) - term to maturity over 1 year 74,342 Total 4,052,170 Excess cover 3,661,784 RISKS AND RISK MANAGEMENT A N N U A L R E P O R T 2 0 1 1 PA G E 2 9 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 calculation of an average of the last three fi nancial years' net income is used to quantify an amount which is added to the risk-weighted items in order 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 assessed 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 regularly assess IT security, including with respect to prepared IT emergency plans, and requirements and levels for accessibility and stability for the IT systems and data used by the bank are then set. 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. PA G E 3 0 R I N G K J OE B I N G L A N D B O B A N K A / S CORPORATE GOVERNANCE Corporate governance Good corporate governance in Ringkjoebing Landbobank concerns the objectives which govern 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 customers, 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 recommendations issued on corporate governance, and the bank's attitude to corporate governance has been minuted in the annual reports since that year. In preparing the 2011 annual report, the bank's board of directors and management reassessed the bank's position with respect to the individual recommendations, including the updated recommendations from 2011. In general, the bank's management supports the activities involved in good corporate governance, and the bank's board of directors and management have elected to adopt almost all of the recommendations thereon, but in individual areas the bank's management has elected either not to follow the recommendations or only to follow them in part. The bank advises that election periods and procedures for members of the shareholders' committee and the board of directors are believed to be appropriate. The bank currently follows 74 of the 79 recommendations. The detailed statement on management in the annual report required under current accounting rules is published on the bank's website at www.landbobanken.dk/godselskabsledelse. This statement also indicates how the bank's management has acted on the supplementary recommendations on corporate governance etc. issued by the Danish Bankers Association. The reader is referred to pages 79 and 80 for information on the board of directors' other managerial activities. A N N U A L R E P O R T 2 0 1 1 PA G E 3 1 STATUTORY STATEMENT ON SOCIAL RESPONSIBILITY Statutory statement on social responsibility Ringkjoebing Landbobank has always been strongly anchored throughout its long history in the local communities where it is represented, and the bank has seen it as an entirely natural part of its business base to support local development. The bank has also, via management's implementation of and attitude to the recommendations for good corporate governance, focused on those matters which govern the interplay with the bank's primary interested parties, namely its shareholders and customers, its management and employees and the local areas in which the bank's branches are situated. The bank's policy on social responsibility is based on a wish to run a responsible and value-creating bank which consciously works to create the best possible results for shareholders, customers, employees, the local community, the environment and the bank itself. For the bank, it is a matter of being an active partner in the local and regional associations and sporting life in the towns and areas in which the bank's branches are situated. The bank does this via numerous sponsorships both at the elite level, but especially at the broad general level so that as many people as possible benefi t from the support which the bank provides to various associations every year. The bank's local and regional commitment is a cornerstone in our business philosophy and one of the reasons why the bank has been able to retain its position as a local and locally known partner to many of the area's businesses and private families, but also for the bank's customers throughout Denmark. With respect to its employees, the bank also takes its social responsibility seriously. Initiatives
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within employee skills development and training as well as activities which promote health and wellbeing are some of the reasons why Ringkjoebing Landbobank is considered an attractive place to work. Over the years, the bank has thus had many employees who have celebrated both their twenty-fi fth and their fortieth anniversaries with the bank. The bank also assumes a considerable level of responsibility in connection with the education of new trainees. In 2011, there was particular focus on the development of employees' expertise in the area of consultancy on pensions. Via its partnership with Letpension, the bank has access to a number of attractive pension products which, in combination with well-qualifi ed employees, make it possible to offer a product which is tailored to the individual customer's needs. This service has been well-received by the bank's customers, and in 2012 the bank expects to continue its training activities in the area of pensions. Ringkjoebing Landbobank is also focused on the environment. The bank thus tries to limit the energy consumption associated with its operations, and there is focus on environmentally correct recycling of the waste products which the bank's operations generate. We also maintain a focus on the reorganisation of activities from paper to IT-based procedures, which also helps to reduce the bank's total environmental impact. A common feature of the bank's initiatives within the area of social responsibility is that they must help to emphasise Ringkjoebing Landbobank's position as an ethical and sustainable company to the bank's interested parties - to its shareholders, customers and employees and to the surrounding world. The bank's website www.landbobanken.dk provides a more detailed account of the bank's social responsibility, including the policies in the area. PA G E 3 2 R I N G K J OE B I N G L A N D B O B A N K A / S Statutory statement on management The board of directors and the shareholders' committee The bank's shareholders' committee consists of 27 members who are elected for terms of four years. The bank's board of directors consists of eight members, six elected by shareholders and two elected by employees. The bank's management is not on the board of directors, but it attends board meetings. The board is elected by the shareholders' committee and its membership is comprised to ensure a broad range of expertise and conformity with a special expertise profi le determined by the board itself. Board members are elected for four years at a time. In accordance with the recommendation of the committee on good corporate governance, at least half the members of the board of directors must be independent. Members of the board of directors and the shareholders' committee are required to resign from the shareholders' committee at the latest at the fi rst annual general meeting after they reach the age of 67. Committee of the board of directors The bank's board of directors has appointed an audit committee whose task is to monitor and check accounting and auditing matters and to make preparations for the board's handling of matters related to accounting and auditing. The committee consists of three members, one of whom possesses legal qualifi cations within auditing and accounts, and is also independent. Other committees, including the remuneration committee, comprise the full baord. Evaluation etc. The board of directors makes an annual evaluation of its activities and the working relationship between itself and management. Each board member fi lls in a form, and the completed evaluation forms are then discussed by the bank's board of directors and management. The board of directors holds 10-12 meetings a year. Remuneration policy The remuneration policy for management and the board of directors of Ringkjoebing Landbobank is that the bank's management is paid remuneration which is both in line with the market and refl ects the management's achievements for the bank. It has also been decided that the remuneration paid to management and the board of directors should be a fi xed amount without any form of incentive component. Other risk-takers and staff in control functions are also not paid variable portions of their remuneration outside the framework of collective agreements. Supplementary information on members of management, including other managerial activities Reference is made to pages 79-81 of this annual report for supplementary information on the bank's management, including information on their other managerial activities. STATUTORY STATEMENT ON MANAGEMENT A N N U A L R E P O R T 2 0 1 1 PA G E 3 3 INFORMATION ON LISTED COMPANIES Information on listed companies The bank advises as follows in accordance with Section 133a of the regulation on fi nancial reports for credit institutions etc.: The bank's share capital on 31 December 2011 was DKK 25.2 million in 5,040,000 shares of nom. DKK 5. The bank has only one share class, and the entire share capital, thus including all shares, is listed on the NASDAQ OMX Copenhagen. There are no limitations on the shares' negotiability. ATP, Hilleroed has advised that they own more than 5% of the bank's share capital. The following rule applies to the right to vote: Each share of up to nom. DKK 500 carries the right to one vote. Shareholdings above this level carry a total of two votes, which is the highest number of votes a shareholder may have 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 elected by shareholders are elected from among the members of the bank's shareholders' committee. The following rule applies to changes to the bank's articles of association: Any decision to change the articles of association is only valid if the proposal is approved by at least two thirds of both votes cast and the share capital with voting rights represented at the meeting. The board of directors has the following authority to issue shares (specifi ed in the articles of association): Following consultation with the shareholders' committee, the board of directors is authorised to increase the share capital by nom. DKK 14,210,980 to nom. DKK 39,410,980 in one or more rounds. This authority applies until 23 February 2015. The board of directors has the following authority to acquire the bank's own shares: The annual general meeting of 23 February 2011 has authorised the board of directors - until the next annual general meeting - to permit the bank to acquire its own shares in accordance with current law to a total nominal value of 10% of the bank's share capital, such that the shares can be acquired at current list price +/- 10%. PA G E 3 4 R I N G K J OE B I N G L A N D B O B A N K A / S A N N U A L R E P O R T 2 0 1 1 PA G E 3 5 Page 36 Management's statement 37 Auditors' reports 40 Profi t and loss account 40 Proposed distribution of profi t 41 Core earnings 42 Balance sheet 44 Statement of shareholders' equity 45 Capital adequacy computation 46 Cash fl ow statement 47 Accounting policies 51 Notes to the annual report 74 Five year main fi gures 76 Five year key fi gures S TATEMENT, R E P O R T S A N D A C C O U N T S PA G E 3 6 R I N G K J OE B I N G L A N D B O B A N K A / S MANAGEMENT'S STATEMENT Statement by management and the board of directors The board of directors and management have today considered and approved the annual fi nancial statements of Ringkjoebing Landbobank A/S for the fi nancial year 1 January - 31 December 2011, including management report, profi t and loss account and statement of total gains and losses, core earnings, balance sheet, statement of equity, statement of capital adequacy, cash fl ow statement, accounting policies, notes and management statement. The annual fi nancial statements were prepared in accordance with the provisions of the Danish Act on Financial Activities and further Danish requirements on listed fi nancial companies concerning disclosure. We consider the accounting policies to be appropriate and the accounting estimates made to be responsible, such that the annual report provides a true and fair view of the bank's assets, liabilities and fi nancial position as of 31 December 2011 and of the result of the bank's activities and cash fl ows for the fi nancial year 1 January - 31 December 2011. We also believe that the management report etc. contain a true and fair review of the developments in the bank's activities and fi nancial circumstances, and a description of the most important risks and uncertainty factors which could affect the bank. The annual fi nancial statements are recommended to the general meeting for approval. Ringkoebing, 1 February 2012 Board of managers: Bent Naur John Bull Fisker Executive General Manager General Manager Ringkoebing, 1 February 2011 Board of directors: Jens Lykke Kjeldsen Gravers Kjaergaard Chairman Deputy Chairman Gert Asmussen Inge Sandgrav Bak Keld Hansen Martin Krogh Pedersen Bo Bennedsgaard Gitte E. S. Vigsoe Employee board member Employee board member A N N U A L R E P O R T 2 0 1 1 PA G E 3 7 A U D I T O R S ' R E P O R T S Internal auditor's declarations To the shareholders of Ringkjoebing Landbobank A/S Certifi cation of the annual fi nancial statements I have audited the annual fi nancial statements of Ringkjoebing Landbobank A/S for the fi nancial year 1 January - 31 December 2011, including profi t and loss account and statement of total gains and losses, core earnings, balance sheet, statement of equity, statement of capital adequacy, cash fl ow statement
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DJ DGAP-UK-Regulatory: Annual Report 2011, -8-
and notes, including accounting policies. The annual fi nancial statements were prepared pursuant to the Danish Act on Financial Activities. The management report, which was not covered by the audit, was prepared in accordance with Danish disclosure requirements for listed fi nancial companies. The audit The audit was performed pursuant to the Danish Financial Supervisory Authority's statutory order on the performance of audits in fi nancial companies etc. and international auditing standards, which require that the audit be planned and performed in order to achieve a high degree of assurance that the fi nancial statements do not contain material misstatements. The audit was performed in accordance with the division of work agreed with the external auditors, and it included assessment of established procedures and internal controls, including the risk management established by management, which is aimed at reporting procedures and material business risks. On the basis of signifi cance and risk, I have checked the basis for amounts and other information in the annual fi nancial statements by random sampling. The audit also included an assessment of whether management's choice of accounting policies is appropriate, whether management's accounting estimates are reasonable, and the total presentation of the fi nancial statements. I participated in the audit of the major and risky areas, and my opinion is that the proof obtained provided an adequate and appropriate basis for my conclusion. The audit did not give occasion for the expression of any reservations. Conclusion In my opinion, the established procedures and internal controls, including the risk management established by management for the bank's reporting processes and major business risks, are functioning satisfactorily. I also believe that the annual fi nancial statements provide a true and fair picture of the bank's assets, liabilities and fi nancial position as of 31 December 2011 and of the result of the bank's activities in the fi nancial year 1 January - 31 December 2011 in accordance with the Act on Financial Activities. Statement on management report I have examined the management report in accordance with the Act on Financial Activities. I did not take any further action in addition to the audit of the annual fi nancial statements which was performed. My opinion on this basis is that the information in the management report is in agreement with the fi nancial statements. Ringkoebing, 1 February 2012 Henrik Haugaard Chief auditor PA G E 3 8 R I N G K J OE B I N G L A N D B O B A N K A / S A U D I T O R ' S R E P O R T S The independent auditor's declaration To the shareholders of Ringkjoebing Landbobank A/S Endorsement of the annual fi nancial statements We have audited the fi nancial statements for Ringkjoebing Landbobank A/S for the fi nancial year 1 January - 31 December 2011, which include the profi t and loss account and the statement of total gains and losses, core earnings, balance sheet, statement of equity, statement of capital adequacy, cash fl ow statement and notes, including accounting policies. The annual fi nancial statements were prepared in accordance with the Danish Act on Financial Activities. The directors' report, which is not covered by the audit, was prepared in accordance with Danish requirements applying to listed fi nancial companies. Management's responsibility for the annual fi nancial statements Management is responsible for preparing annual fi nancial statements which provide a true and fair picture in accordance with the Danish Act on Financial Activities. Management is also responsible for the internal checks which management considers necessary for the preparation of annual fi nancial statements without material misstatements whether these are attributable to fraud or error. The auditor's responsibility Our responsibility is to express a conclusion on the annual fi nancial statements on the basis of our audit. We have performed our audit in accordance with international auditing standards and additional requirements under Danish accounting legislation. These standards specify that we comply with ethical requirements and that we plan and perform the audit in order to gain a high degree of assurance that the fi nancial statements do not contain material misstatements. An audit covers actions intended to provide proof of the amounts and the information specifi ed in the fi nancial statements. The chosen actions depend on the auditor's assessment, including the assessment of risk of material misstatements in the fi nancial statements whether these are attributable to fraud or error. In the assessment of risk, the auditor considers internal controls of relevance to the bank's preparation of fi nancial statements which provide a true and fair picture. The object is to design actions which are appropriate in the circumstances, but not to express a conclusion on the effectiveness of the bank's internal controls. An audit also covers expressing an opinion on whether the accounting policies used by management are appropriate, whether the estimates made by management are reasonable, and an assessment of the total presentation of the fi nancial statements. In our opinion, the evidence we obtained for our audit provided an adequate and appropriate basis for our conclusion. The audit has not given occasion for the expression of any reservations. A N N U A L R E P O R T 2 0 1 1 PA G E 3 9 Conclusion In our opinion, the annual fi nancial statements provide a true and fair picture of the company's assets, liabilities and fi nancial position as of 31 December 2011 and the result of the company's activities for the fi nancial year 1 January - 31 December 2011 in accordance with the Act on Financial Activities. Statement on the management report We have read the management report in accordance with the Act on Financial Activities. We have not performed any further actions in addition to our audit of the annual fi nancial statements. We believe on this basis that the information in the management report is in accordance with the fi nancial statements. Ringkoebing, 1 February 2012 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Ole Blinkenberg Alex Nyholm State-authorised State-authorised public accountant public accountant PA G E 4 0 R I N G K J OE B I N G L A N D B O B A N K A / S Note 2011 2010 no. DKK 1,000 DKK 1,000 1 Interest receivable 858,257 836,339 2 Interest payable 245,291 241,954 Net income from interest 612,966 594,385 3 Dividend on capital shares etc. 1,111 1,219 4 Income from fees and commissions 158,303 170,389 4 Fees and commissions paid 24,312 25,996 Net income from interest and fees 748,068 739,997 5 Value adjustments 16,386 +52,159 Other operating income 4,535 3,893 6,7,9 Staff and administration costs 244,068 236,374 10 Amortisation, depreciation and write-downs on intangible and tangible assets 4,375 3,219 Other operating costs Miscellaneous other operating costs 381 195 Costs bank package I and Deposit Guarantee Fund 11,178 46,590 Write-downs on loans and debtors etc. 14 Write-downs on loans and other debtors -128,799 -138,217 15 Write-downs on national bank package I etc. 0 -33,152 Result of capital shares in associated companies +11 +14 Profi t before tax 380,199 338,316 11 Tax 94,128 81,443 Profi t after tax 286,071 256,873 Other comprehensive income 0 0 Comprehensive income after tax 286,071 256,873 P R O F I T A N D L O S S A C C O U N T 2011 2010 DKK 1,000 DKK 1,000 Profi t after tax 286,071 256,873 Total amount available for distribution 286,071 256,873 Dividend 65,520 60,480 Other purposes 500 500 Transferred to reserve for net revaluation under the intrinsic value method +11 +14 Appropriation to own funds 220,040 195,879 Total distribution of the amount available 286,071 256,873 P R O P O S E D D I S T R I B U T I O N O F P R O F I T A N N U A L R E P O R T 2 0 1 1 PA G E 4 1 CORE EARNINGS 2011 2010 DKK 1,000 DKK 1,000 Net income from interest 606,576 583,398 Net income from fees and provisions excl. commission 115,200 118,145 Income from sector shares 4,437 3,931 Foreign exchange income 17,914 22,440 Other operating income etc. 4,535 3,893 Total core income excl. trade income 748,662 731,807 Trade income 18,791 26,248 Total core income 767,453 758,055 Staff and administration costs 244,068 236,374 Amortisations, depreciations and write-downs on intangible and tangible assets 4,375 3,219 Other operating costs 381 195 Total costs etc. 248,824 239,788 Core earnings before write-downs on loans 518,629 518,267 Write-downs on loans and other debtors -128,799 -138,217 Core earnings 389,830 380,050 Result for portfolio +1,547 +38,008 Costs bank package I and Deposit Guarantee Fund 11,178 79,742 Profi t before tax 380,199 338,316 Tax 94,128 81,443 Profi t after tax 286,071 256,873 PA G E 4 2 R I N G K J OE B I N G L A N D B O B A N K A / S BALANCE Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 Assets Cash in hand and claims at call on central banks 33,935 59,597 12 Claims on credit institutions and central banks Claims at notice on central banks 186,989 1,329,844 Money market operations and bilateral loans - term to maturity under 1 year 536,453 1,063,528 Bilateral loans - term to maturity over 1 year 590,876 261,335 13,14,16 Loans and other debtors at amortised cost price 12,746,560 13,151,216 Loans and other debtors at amortised cost price 11,938,197 12,326,328 Wind turbine loans with direct funding 808,363 824,888 17 Bonds at current value 2,755,912 1,546,282 18 Shares etc. 249,054 257,253 Capital shares in associated companies 538 527
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DJ DGAP-UK-Regulatory: Annual Report 2011, -9-
19 Land and buildings total 74,722 75,662 Investment properties 6,681 7,261 Domicile properties 68,041 68,401 20 Other tangible assets 4,893 4,430 Actual tax assets 12,255 20,827 Temporary assets 1,382 150 21 Other assets 348,567 469,600 Periodic-defi ned items 6,887 6,953 Total assets 17,549,023 18,247,204 B A L A N C E S H E E T A N N U A L R E P O R T 2 0 1 1 PA G E 4 3 Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 Liabilities and equity 22 Debt to credit institutions and central banks Debt to central banks 0 0 Money market operations and bilateral credits - term to maturity under 1 year 285,028 636,326 Bilateral credits - term to maturity over 1 year 148,684 1,170,976 Bilateral credits from the KfW Bankengruppe 808,363 824,888 23 Deposits and other debts 12,755,415 11,661,654 24 Issued bonds at amortised cost price 338,958 337,617 25 Other liabilities 301,813 592,871 Periodic-defi ned items 183 282 Total debt 14,638,444 15.224.614 26 Provisions for pensions and similar liabilities 5,146 5,858 27 Provisions for deferred tax 4,789 3,929 14 Provisions for losses on guarantees 5,038 1,383 Other provisions for liabilities 0 2,077 Total provisions for liabilities 14,973 13,247 28 Subordinated loan capital 198,014 488,882 28 Hybrid core capital 214,472 208,117 28 Total subordinated debt 412,486 696,999 29 Share capital 25,200 25,200 Reserve for net revaluation under the intrinsic value method 187 176 Proposed dividend etc. 66,020 60,980 Profi t carried forward 2,391,713 2,225,988 Total shareholders' equity 2,483,120 2,312,344 Total liabilities and equity 17,549,023 18.247.204 31 Contingent liabilities etc. PA G E 4 4 R I N G K J OE B I N G L A N D B O B A N K A / S STATEMENT OF SHAREHOLDERS' EQUITY Reserve for net revaluation under the intrin- Proposed Profi t Total Share sic value dividend carried shareholders' DKK 1,000 capital method etc. forward equity 2010 Shareholders' equity at the end of the previous fi nancial year 25,200 162 0 2,030,411 2,055,773 Dividend etc. paid 0 Dividend received on own shares 0 Shareholders' equity after allocation of dividend etc. 25,200 162 0 2,030,411 2,055,773 Purchase and sale of own shares -3,595 -3,595 Other shareholders' equity items 3,293 3,293 Profi t for the fi nancial year 14 60,980 195,879 256,873 Shareholders' equity on the balance sheet date 25,200 176 60,980 2,225,988 2,312,344 2011 Shareholders' equity at the end of the previous fi nancial year 25,200 176 60,980 2,225,988 2,312,344 Dividend etc. paid -60,980 -60,980 Dividend received on own shares 168 168 Shareholders' equity after allocation of dividend etc. 25,200 176 0 2,226,156 2,251,532 Purchase and sale of own shares -58,391 -58,391 Other shareholders' equity items 3,908 3,908 Profi t for the fi nancial year 11 66,020 220,040 286,071 Shareholders' equity on the balance sheet date 25,200 187 66,020 2,391,713 2,483,120 A N N U A L R E P O R T 2 0 1 1 PA G E 4 5 C A P I TAL ADEQUACY COMPUTATION End Dec. 2011 End Dec. 2010 DKK 1,000 DKK 1,000 Calculated pursuant to the Executive order on Capital Adequacy issued by the Danish Financial Supervisory Authority. Weighted items with credit and counterpart risks 11,041,407 11,110,261 Market risk 750,457 714,897 Operational risk 1,396,138 1,322,788 Total risk-weighted items 13,188,002 13,147,946 Share capital 25,200 25,200 Reserve for net revaluation under the intrinsic value method 187 176 Profi t carried forward 2,457,733 2,286,968 Core capital 2,483,120 2,312,344 Proposed dividend etc. -66,020 -60,980 Addition to/deduction from the core capital -187 -176 Core capital after deductions 2,416,913 2,251,188 Hybrid core capital 200,000 200,000 Core capital after deductions incl. hybrid core capital 2,616,913 2,451,188 Subordinated loan capital 200,723 491,575 Addition to/deduction from the capital base 187 176 Capital base after deductions 2,817,823 2,942,939 Core capital ratio excl. hybrid core capital (%) 18.3 17.1 Core capital ratio (%) 19.8 18.6 Solvency ratio (%) 21.4 22.4 Capital base requirements under Section 124 (2,1) of the Danish Financial Business Act 1,055,040 1,051,836 PA G E 4 6 R I N G K J OE B I N G L A N D B O B A N K A / S C A S H F L O W S TATEMENT 2011 2010 DKK 1,000 DKK 1,000 Operation activities Profi t for the fi nancial year 286,071 256,873 Amortisations, depreciations and write-downs on intangible and tangible assets 4,375 3,219 Write-downs on loans and debtors etc. 164,539 167,438 Items not affecting liquidity -279,386 3,666 Adjusted result of operations 175,599 431,196 Changes in operating capital Claims on and debt to credit institutions etc., net -1,478,199 151,754 Loans and other debtors at amortised cost price 240,117 -271,442 Securities, not liquid and pledged 100,393 -135,101 Deposits and other debts 1,093,761 474,184 Issued bonds at amortised cost price 1,341 -219,720 Other assets and liabilities, net -161,852 2,485 Cash fl ows from operating activities -28,840 433,356 Investment activities Intangible and tangible assets -4,268 -3,608 Cash fl ows from investment activities -4,268 -3,608 Financing activities Paid dividend, net -60,812 0 Own shares etc. -58,391 -3,595 Cash fl ows from fi nancing activities -119,203 -3,595 Total effect on liquidity for the year -152,311 426,153 Cash and cash equivalents, beginning of year 2,812,677 2,386,524 Cash and cash equivalents, end of year 2,660,366 2,812,677 Cash and cash equivalents, end of year specifi ed thus: Cash in hand and claims at call on central banks 33,935 59,597 Claims on credit institutions and central banks 204,899 1,633,372 Securities, unpledged 2,421.532 1,119,708 Total cash and cash equivalents, end of year 2,660,366 2,812,677 The cash fl ow statement cannot be derived from this annual report, and the statement has also been adapted to the special statement of accounts etc. for banks. A N N U A L R E P O R T 2 0 1 1 PA G E 4 7 A C C O U N T I N G P O L I C I E S Accounting policies Basis for preparing the annual report General The annual report is prepared in accordance with the provisions of the Danish Financial Business Act and the applicable Executive Order on Financial Reports for Credit Institutions and Investment Companies etc. The annual report is also prepared in accordance with the disclosure requirements of NASDAQ OMX Copenhagen (Copenhagen Stock Exchange), to the extent to which the Danish Financial Business Act, the Executive Order on Financial Reports for Credit Institutions and Investment Companies etc. or other Executive Orders from the Danish Financial Supervisory Authority do not specify a different practice. The annual report is presented in DKK rounded to the nearest 1,000 kroner. The accounting policies are unchanged relative to last year. Inclusion and measuring - general Assets are included in the balance sheet when it is probable that future fi nancial 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 profi t and loss account in step with its earning. Costs paid to achieve the income for the year are included in the profi t and loss account, and value adjustments made to fi nancial assets, fi nancial liabilities and derivative fi nancial instruments are also included in the profi t 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 fi nal 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 fi nancial instruments, and provisions for liabilities. The most important estimates on write-downs on loans and debtors are associated with quantifi cation 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 Denmark. Income and expenses are converted continuously at the exchange rate on the transaction date. Financial instruments - general In general, the bank measures fi nancial assets and liabilities at current value on fi rst inclusion. Measuring is subsequently made at current value unless otherwise specifi cally emerges from the following sections on the individual accounts items. The bank uses the date of payment as the date of entry for fi nancial instruments. Derivative fi nancial instruments Forward transactions, interest rate swaps and other derivative fi nancial instruments are included at current 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 hedging 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 fi nancial instrument. All value adjustments concerning derivative fi nancial instruments and items
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DJ DGAP-UK-Regulatory: Annual Report 2011, -10-
subject to hedging for accounting purposes are entered under the item >>Value adjustments<< in the profi t and loss account. PA G E 4 8 R I N G K J OE B I N G L A N D B O B A N K A / S The profi t 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 writtendown 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 profi t and loss account over the term of the loans and receivables as part of the effective interest rate on the loans as interest income, as referred to in the above section >>Interest income<<. Commissions relating to garantees are carried to income over the term of the garantees. Income generated upon performing a given transaction, including securities and custodianship fees plus payment handling fees, are recognised as income when the transaction has been performed. Staff and administration costs Staff and administration costs comprise among other things salaries, pension costs, IT-costs, etc. Write-downs on loans and debtors etc. This item includes losses and write-downs on loans and other debtors and losses and provisions on guarantees. The item also includes losses and write-downs on claims on credit institutions and losses and provisions on the national bank package I. Tax Tax on the profi t for the year is booked as a cost in the profi t and loss account. Net deferred tax is calculated on the items which cover the delay in accounting and booking of taxable income and expenses at the tax rate applicable on the balance sheet date. Core earnings The core earnings provide a statement of the bank's income and costs. In total, the core earnings contain the same items as the profi t and loss account but with a different degree of specifi cation. The balance sheet Claims on credit institutions and central banks The fi rst 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 fi nancial instruments<< with respect to hedging for accounting purposes. Loans and other debtors The fi rst 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 assessment 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 signifi cant explanatory macroeconomic variables via a linear regression analysis. The explanatory macroeconomic variables include unemployment, house prices, interest rates, number of bankruptcies/forced auctions etc. A C C O U N T I N G P O L I C I E S A N N U A L R E P O R T 2 0 1 1 PA G E 4 9 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 refl ect the credit risk for the bank's own loan portfolio. This assessment has resulted in an adaptation of the estimates under the model to the bank's own circumstances, under which the adapted estimates form the basis for calculation of the group writedowns. The adjusted estimates were further corrected to take account of the changed economic conditions. For each group of loans and debtors, there is an estimate which expresses the percentage decrease in value associated with a given group of loans and debtors on the balance sheet date. A comparison of the individual loan's current risk of loss with the loan's original risk of loss and its risk of loss at the beginning of the current accounting period provides the individual loan's contribution to the group write-downs. The write-down is calculated as the difference between the book value and the discounted value of the expected future payments. With respect to hedging for accounting purposes reference is made to section >>Derivative fi nancial instruments<<. Changes in write-downs which have been made are adjusted in the profi t and loss account under the item >>Write-downs on loans and debtors etc.<<. Bonds and shares Securities which are listed on a stock exchange are included at current value, determined on the basis of the closing price on balance sheet date. Unlisted securities are also included at current value, computed on the basis of what the price would be in a transaction between independent parties. The management takes an active approach to the calculation of this market value. All ongoing value adjustments to listed and unlisted securities are entered in operations under the item >>Value adjustments<<. Capital shares in associated companies Capital shares in associated companies are entered in the balance sheet under the intrinsic value method. Land and buildings Land and buildings cover the two items >>Investment properties<< and >>Domicile properties<<. The properties 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 profi t 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 profi t 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 profi t 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 profi t 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. Assets taken over are recognized at fair value upon taking them over and subsequently measured at estimated realizable value. Other assets Other assets include interest and commissions receivable as well as the positive market value of derivative fi nancial instruments. PA G E 5 0 R I N G K J OE B I N G L A N D B O B A N K A / S Tax Actual tax assets and actual tax liabilities are recognized in the balance sheet as tax calculated on the taxable income for the year, adjusted for tax paid on account. A deferred tax liability is allocated under the item >>Provisions for deferred tax<< and if a deferred tax asset is booked under the item >>Deferred tax assets<< following a cautious assessment of the asset's value. Debt to credit institutions and central banks / Deposits and other debts / Issued bonds at amortised cost price / Subordinated debt Measurement is at amortised cost price, but reference is made to the section >>Derivative fi nancial instruments << with respect to hedging for accounting purposes. Other liabilities Other liabilities include interest and commissions payable and the negative marked value of derivative fi nancial instruments. Provisions for liabilities Provisions for liabilities include mainly provisions for pensions, deferred tax and losses on guarantees. A provision is recognized in respect of a guarantee or an irrevocable credit commitment if it is likely that the guarantee or the credit commitment will be exercised and the amount of the commitment can be reliably determined. Provisions are based on Management's best estimate of the amount of the commitments.
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DJ DGAP-UK-Regulatory: Annual Report 2011, -11-
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 profi t and loss account under the item >>Write-downs on loans and debtors etc.<< Cash fl ow statement The cash fl ow 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 fl ows. The cash fl ows from the operating activity are computed as the result for the year, adjusted for nonliquid items and changes in operating capital. Cash fl ows from the investment activity cover purchases and sale of fi xed assets etc. Cash fl ows from the fi nancing 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 certifi cates 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 fi gures >>Total capital base<< on page 3 under >>Main fi gures for the bank<< is computed as the banks capital base after deductions. The >>Pre-tax return on equity at the beginning of the year<<, and the >>Return on equity after tax at the beginning of the year<< as given on page 3 under >>Key fi gures for the bank<< were calculated after deduction of dividend etc., net. >>Key fi gures per DKK 5 share<< on page 3 were calculated on the basis of 2011: 4,940,000 shares and 2007 to 2010: 5,040,000 shares. All calculations etc. concerning write-downs on pages 3, 8, 19 and 20 were made exclusive of amounts under the national bank package I etc. With effect from 2008, the bank changed the calculation of the key fi gure >>Rate of costs<<. The key fi gure is now calculated as >>Total costs etc.<< (including depreciation on tangible fi xed assets) divided by >>Total core income<< multiplied by 100. The comparative fi gures on the pages 3 and 7 have been adjusted for the change method of calculation. It is noted, that the individual solvency requirement (reported at page 12, 13 and 16) not is audited. A C C O U N T I N G P O L I C I E S A N N U A L R E P O R T 2 0 1 1 PA G E 5 1 1 Interest receivable Claims on credit institutions and central banks 38,712 37,150 Loans and other debtors 775,891 748,211 Loans - interest concerning the written-down part of loans -35,740 -29,221 Bonds 58,993 47,905 Total derivatives fi nancial instruments, 20,069 31,080 of which Currency contracts 9,205 13,537 Interest-rate contracts 10,864 17,543 Other interest receivable 332 1,214 Total interest receivable 858,257 836,339 2 Interest payable Credit institutions and central banks 44,311 45,468 Deposits and other debts 169,174 146,978 Issued bonds 12,887 21,252 Subordinated debt 18,605 28,049 Other interest payable 314 207 Total interest payable 245,291 241,954 3 Dividend on capital shares etc. Shares 1,111 1,219 Total dividend on capital shares etc. 1,111 1,219 4 Fees and commissions Gross income from fees and commissions Securities trading 24,117 34,812 Asset management 53,997 56,624 Payment handling 19,679 19,170 Loan fees 7,817 9,985 Guarantee commissions 34,898 31,270 Other fees and commissions 17,795 18,528 Total gross income from fees and commissions 158,303 170,389 Fees and commissions paid Securities trading 5,326 8,564 Asset management 4,110 4,556 Payment handling 2,061 2,354 Loan fees 1,765 2,257 Other fees and commissions 11,050 8,265 Total fees and commissions paid 24,312 25,996 Net income from fees and commissions Securities trading 18,791 26,248 Asset management 49,887 52,068 Payment handling 17,618 16,816 Loan fees 6,052 7,728 Guarantee commissions 34,898 31,270 Other fees and commissions 6,745 10,263 Total net income from fees and commissions 133,991 144,393 Foreign exchange income 17,914 22,440 Total net income from fees, commissions and foreign exchange income 151,905 166,833 Note 2011 2010 no. DKK 1,000 DKK 1,000 N O T E S T O T H E A N N U A L R E P O R T PA G E 5 2 R I N G K J OE B I N G L A N D B O B A N K A / S 5 Value adjustments Loans and other debtors at current value* 6,746 4,336 Bonds 2,619 34,044 Shares etc. -4,956 2,702 Shares in sector companies etc. 3,680 2,853 Investment properties -579 0 Foreign exchange income 17,914 22,440 Total derivative fi nancial instruments, -10,050 -11,334 of which Interest-rate contracts -10,050 -11,333 Share contracts 0 -1 Issued bonds -744 -965 Other liabilities 1,756 -1,917 Total value adjustments 16,386 52,159 * Cf. note 36. 6 Staff and administration costs Payments to board of managers, board of directors and shareholders' committee Board of managers*/**: Bent Naur: Fixed payment 3.963 3.751 John Fisker: Fixed payment 3.274 3.195 Reserved provisions for pensions 0 -919 Total payment 7.237 6.027 Board of directors***: Jens Lykke Kjeldsen, chairman 242 236 Gravers Kjaergaard, deputy chairman 162 158 Gert Asmussen 125 121 Keld Hansen 125 121 Martin Krogh Pedersen 83 0 Inge Sandgrav Bak 83 0 Bo Bennedsgaard 125 121 Gitte E. S. Vigsoe 104 0 Soeren Nielsen 0 71 Vederlag i alt 1,049 828 Shareholders committee: Total payment 336 331 Total 8,622 7.186 Staff costs Salaries 111,030 109,878 Pensions 11,522 11,320 Social security expenses 900 790 Costs depending on number of staff 14,719 11,962 Total 138,171 133,950 Other administration costs 97,275 95,238 Total staff and administration costs 244,068 236,374 * Management does not receive variable payment. ** The management has a company car. *** The board of directors' fee is fi xed. N O T E S T O T H E A N N U A L R E P O R T Note 2011 2010 no. DKK 1,000 DKK 1,000 A N N U A L R E P O R T 2 0 1 1 PA G E 5 3 7 Number of employees Average number of employees during the fi nancial year converted into full-time employees 252 254 8 Incentive programmes The bank has no incentive programmes. 9 Fee to the auditor elected by the general meeting Statutory audit 603 597 Other declarations with security 27 0 Advice on tax 19 24 Other services 13 88 Total fee to the auditor elected by the general meeting 662 709 It is noted, that the bank also has an internal auditor 10 Amortisations, depreciations and write-downs on intangible and tangible assets Tangible assets Domicile properties, depreciations 1,353 533 Other tangible assets, depreciations 3,022 2,686 Total amortisations, depreciations and write-downs on intangible and tangible assets 4,375 3,219 11 Tax Tax calculated on the years profi t 93,159 83,055 Adjustment of deferred tax 860 -1,159 Adjustment of tax calculated for previous years 109 -453 Total tax 94,128 81,443 Effective tax rate (%): The current tax rate of the bank 25.0 25.0 Adjustment of tax on non-liable income and non-deductible costs etc. -0.5 -0.8 Adjustment of tax calculated for previous years 0.0 -0.1 Total effective tax rate 24.5 24.1 End Dec. 2011 End Dec. 2010 DKK 1,000 DKK 1,000 12 Claims on credit institutions and central banks Claims at call 17,910 303,528 Up to and including 3 months 661,989 1,429,844 More than 3 months and up to and including 1 year 43,543 660,000 More than 1 year and up to and including 5 years 590,876 261,335 More than 5 years 0 0 Total claims on credit institutions and central banks 1,314,318 2,654,707 Distributed as follows: Claims at notice on central banks 186,989 1,329,844 Claims on credit institutions 1,127,329 1,324,863 1,314,318 2,654,707 13 Loans and other debtors at amortised cost price At call 2,689,793 3,528,048 Up to and including 3 months 476,999 585,341 More than 3 months and up to and including 1 year 2,016,455 1,961,971 More than 1 year and up to and including 5 years 3,666,432 4,065,526 More than 5 years 3,896,881 3,010,330 Total loans and other debtors at amortised cost price 12,746,560 13,151,216 Note 2011 2010 no. DKK 1,000 DKK 1,000 PA G E 5 4 R I N G K J OE B I N G L A N D B O B A N K A / S 14 Write-downs on loans and other debtors and provisions for losses on guarantees Individual write-downs Cumulative individual write-downs on loans and other debtors at the end of the previous fi nancial year 532,441 424,517 Write-downs/value adjustments during the year 205,130 289,432 Reverse entry - write-downs made in previous fi nancial years -110,870 -120,381 Booked losses covered by write-downs -49,349 -61,127 Cumulative individual write-downs on loans and other debtors on the balance sheet date 577,352 532,441 Group write-downs Cumulative group write-downs on loans and other debtors at the end of the previous fi nancial year 31,211 41,132 Write-downs/value adjustments during the year 36,255 0 Reverse entry - write-downs made in previous fi nancial years 0 -9,921 Cumulative group write-downs on loans and other debtors on the balance sheet date 67,466 31,211 Total cumulative write-downs on loans and other debtors on the balance sheet date 644,818 563,652 Provisions for losses on guarantees Cumulative individual provisions for losses on guarantees at
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DJ DGAP-UK-Regulatory: Annual Report 2011, -12-
the end of the previous fi nancial year 1,383 1,376 Provisions/value adjustments during the year 4,605 1,000 Reverse entry - provisions made in previous fi nancial years -885 -993 Booked losses covered by write-downs -65 0 Cumulative individual provisions for losses on guarantees on the balance sheet date 5,038 1,383 Total cumulative write-downs on loans and other debtors and provisions for losses on guarantees on the balance sheet date 649,856 565,035 It is noted that no write-downs were made on outstanding claims on credit institutions and other receivables at the end of 2011. The above fi gures in this note therefore do not include any such write-downs. 15 Provisions national bank package I etc. Cumulative individual provisions at the end of the previous fi nancial year 0 45,101 Provisions/value adjustments during the year 0 33,152 Final payment - transferred to other liabilities 0 -78,253 Cumulative individual provisions on the balance sheet date 0 0 It is noted that the item in the profi t and loss account in 2010 primarily concerns write-downs made on the national bank package I. 16 Suspended calculation of interest Loans and other debtors with suspended calculation of interest on the balance sheet date 61,419 66,237 N O T E S T O T H E A N N U A L R E P O R T Note End Dec. 2011 End Dec. 20109 no. DKK 1,000 DKK 1,000 A N N U A L R E P O R T 2 0 1 1 PA G E 5 5 17 Bonds at current value Listed on the stock exchange 2,755,912 1,546,282 Total bonds at current value 2,755,912 1,546,282 18 Shares etc. Listed on NASDAQ OMX Copenhagen 12,033 25,267 Unlisted shares at current value 1,460 1,490 Sector shares at current value 214,583 209,086 Other holdings 20,978 21,410 Total shares etc. 249,054 257,253 Sector shares are distributed as follows: Asset management and pension BankInvest Holding A/S 27,924 22,409 EgnsInvest Holding A/S 115 42 Letpension Holding A/S 3,748 3,748 SparInvest Holding A/S 3,688 5,945 Sector infrastructure Multidata Holding A/S 2,748 2,748 Nets Holding A/S 12,791 12,367 Swift 25 23 Vaerdipapircentralen A/S 1,145 1,145 Bankernes Kontantservice A/S 426 426 Mortgage credit DLR Kredit A/S 124,933 123,907 PRAS A/S 37,040 36,326 Total sector shares 214,583 209,086 19 Land and buildings Investment properties Current value at the end of the previous fi nancial year 7,261 7,261 Acquisitions during the year, including improvements 0 0 Disposals during the year 0 0 Value adjustments to current value for the year -580 0 Current value on the balance sheet date 6,681 7,261 Domicile properties Reassessed value at the end of the previous fi nancial year 68,401 69,328 Acquisitions during the year, including improvements 993 236 Disposals during the year 0 -1,487 Depreciations for the year -553 -533 Value adjustments to current value for the year -800 0 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 0 857 Total reassessed value on the balance sheet date 68,041 68,401 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. Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 PA G E 5 6 R I N G K J OE B I N G L A N D B O B A N K A / S N O T E S T O T H E A N N U A L R E P O R T 20 Other tangible assets Cost price Cost price at the end of the previous fi nancial year without depreciations and write-downs 28,399 29,826 Acquisitions during the year, including improvements 3,557 4,172 Disposals during the year -3,132 -5,599 Total cost price on the balance sheet date 28,824 28,399 Write-downs and depreciations Write-downs and depreciations at the end of the previous fi nancial year 23,969 26,771 Write-downs for the year 0 0 Depreciations for the year 3,022 2,686 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 -3,060 -5,488 Total depreciations and write-downs on the balance sheet date 23,931 23,969 Total other tangible assets on the balance sheet date 4,893 4,430 21 Other assets Interest and commissions receivable 58,383 42,493 Positive market value of derivative fi nancial instruments 267,853 395,882 Miscellaneous receivables and other assets 22,331 31,225 Total other assets 348,567 469,600 22 Debt to credit institutions and central banks Debt payable on demand 210,686 520,010 Up to and including 3 months 26,619 27,169 More than 3 months and up to and including 1 year 150,127 184,789 More than 1 year and up to and including 5 years 583,111 1,570,313 More than 5 years 271,532 329,909 Total debt to credit institutions and central banks 1,242,075 2,632,190 Distributed as follows: Debt to central banks 0 0 Debt to credit institutions 1,242,075 2,632,190 1,242,075 2,632,190 The bank has undrawn long-term committed revolving credit facilities equivalent to: Term to maturity under 1 year 100,000 596,352 Term to maturity over 1 year 74,342 174,544 Total 174,342 770,896 Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 A N N U A L R E P O R T 2 0 1 1 PA G E 5 7 23 Deposits and other debts On demand* 6,372,268 5,755,406 Deposits and other debts at notice: Up to and including 3 months 2,166,283 2,058,207 More than 3 months and up to and including 1 year 1,175,194 832,457 More than 1 year and up to and including 5 years 1,561,041 1,600,801 More than 5 years 1,480,629 1,414,783 Total deposits and other debts 12,755,415 11,661,654 Distributed as follows: On demand 5,822,693 5,582,938 At notice 146,889 131,139 Time deposits 3,740,496 2,925,948 Long-term deposit agreements 1,805,129 1,860,570 Special types of deposits* 1,240,208 1,161,059 12,755,415 11,661,654 * Special types of deposits are entered under the item >>On demand<< pending payment, while in the specifi cation of the different types of deposits, the sum is instead included under >>Special types of deposits<<. 24 Issued bonds at amortised cost price On demand 0 0 Up to and including 3 months 2,955 0 More than 3 months and up to and including 1 year 0 0 More than 1 year and up to and including 5 years 336,003 337,617 More than 5 years 0 0 Total issued bonds at amortised cost price 338,958 337,617 Distributed as follows: Issues in Danish kroner Nom. DKK 220 million 220,000 220,000 Issues in Norwegian kroner Nom. NOK 100 million 95,880 95,340 Regulation at amortised cost price and adjustment to current value of issues in Norwegian kroner 9,241 8,440 Other issues 13,837 13,837 338,958 337,617 25 Other liabilities Interest and commissions payable 56,166 55,967 Negative market value of derivative fi nancial instruments 159,683 378,188 Micellaneous payables and other liabilities 85,964 158,716 Total other liabilities 301,813 592,871 26 Provisions for pensions and similar liabilities The provisions concern conditional pension commitments to current members of the board of managers and a pension commitment to a former member of the board of managers from a merged bank. 5,146 5,858 27 Provisions for deferred tax The calc. provisions for defer. tax relates to the balance sheet items: Loans and other debtors -1,446 -1,395 Securities 2,568 2,868 Tangible assets -644 -914 Provisions for liabilities -1,287 -1,984 Other assets/liabilities 5,598 5,354 Total provisions for deferred tax 4,789 3,929 Deferred tax is calculated at (%) 25.0 25.0 Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 PA G E 5 8 R I N G K J OE B I N G L A N D B O B A N K A / S N O T E S T O T H E A N N U A L R E P O R T 28 Subordinated debt Possible Interest early rate Cur- Due redemption Type (%) rency Mill. date date Subordinated loan capital Bond loan*/**** 3.995 DKK 300 - - 0 300,000 Bilateral agreement** Floating EUR 27 30 June 2021 30 June 2018 200,723 201,269 Total subordinated loan capital 200,723 501,269 Hybrid core capital Bond loan***/**** 4.795 DKK 200 Indefi nite 2 March 2015 200,000 200,000 Total hybrid core capital 200,000 200,000 Subordinated debt included in the calculation of the capital base (before deduction of own holding) 400,723 701,269 Regulation at amortised cost price and adjustment to current value 11,763 5,424 Own holding of subordinated loan capital 0 -9,694 Total subordinated debt 412,486 696,999 * The loan has been terminated on 9 February 2011. Interest - 2011: tDKK 1,251 / 2010: tDKK 11,703 ** 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 - 2011: tDKK 7,634 / 2010: tDKK 6,598 *** 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 - 2011: tDKK 9,720 / 2010: tDKK 9,748 **** Admitted for listing on NASDAQ OMX Copenhagen. 29 Share capital Number of shares at DKK 5 each: Beginning of year 5,040,000 5,040,000 End of year 5,040,000 5,040,000 Reserved for subsequent cancellation 100,000 0 Share capital 25,200 25,200 The whole share capital has been admitted for listing on NASDAQ OMX Copenhagen. 30 Own capital shares Own capital shares included in the balance sheet at 0 0 The market value is 58,395 6,900 Number of own shares: Beginning of year 9,517 8,572 Purchase of own shares during the year 263,030 319,220 Sale of own shares during the year -171,692 -318,275
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DJ DGAP-UK-Regulatory: Annual Report 2011, -13-
End of year 100,855 9,517 Nominal value of holding of own shares, end of year 504 48 Own shares' proportion of share capital end of year (%): Beginning of year 0.2 0.2 Purchase of own shares during the year 5.2 6.3 Sale of own shares during the year -3.4 -6.3 End of year 2.0 0.2 Total purchase price for shares acquired during the year 226,968 197,924 Total sales price for shares sold during the year 168,577 194,329 The transactions for the year in own shares were made on the basis of the bank's ordinary trading with shares. Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 A N N U A L R E P O R T 2 0 1 1 PA G E 5 9 End Dec. 2011 End Dec. 2010 DKK 1,000 DKK 1,000 31 Contingent liabilities etc. Contingent liabilities Finance guarantees 653,353 668,504 Guarantees for foreign loans 5,576 8,602 Guarantees against losses on mortgage credit loans 50,138 44,098 Guarantees against losses Totalkredit 118,540 112,585 Registration and conversion guarantees 55,361 82,614 Sector guarantees 39,413 37,290 Other contingent liabilities 129,841 88,290 Total contingent liabilities 1,052,222 1,041,983 32 Assets furnished as security First mortgage loans were provided for German wind turbine projects. The loans are funded directly by KfW Bankengruppe, to which security in the associated loans has been provided. Each reduction of the fi rst mortgage loans is deducted directly from the funding at the KfW Bankengruppe. 808,363 824,888 As security for clearing and any debt, the bank has pledged securities from its holding to the Central Bank of Denmark to a total market price of 269,005 468,198 33 Legal proceedings, etc. The bank is not party to any legal proceedings that are estimated to result in major losses and in that way to a substantial change of the accounts. 34 Related parties Related parties are among others the bank's board of directors and board of managers, managerial employees and their relatives. Ringkjoebing Landbobank advises that it has no related parties with a controlling infl uence on the bank (defi ned as >20% ownership). There were no transactions during the year with the board of directors and board of managers or managerial employees apart from the payment of salaries and compensation etc., stock exchange business and the provision of loans and guarantees. It is also noted that all of the transactions performed in 2011 and 2010 with related parties, including credit facilities, were carried out on market terms or a cost-cover basis. Two new members joined the board of directors in 2011, making a total eight members. Information on the remuneration made to the board of directors and board of managers is given in note 6. Information on the size of loans, mortgages, sureties and guarantees provided to members of the bank's board of directors and board of managers and the security received is given in this note. The information in the note covers these parties' personal engagements and those of their relatives. Information on the shareholdings held by the board of directors and board of managers is given in this note. The amount of loans issued to and mortgages, sureties or guarantees issued for the members of the bank's: Interest rates 2011 Board of managers (Mastercard) 250 250 Board of directors, incl. elected by the staff 2.1%-6.9% 29,510 8,696 All engagements are performed under market terms, including both interest and guarantee commission rates. Security pledged from members of the bank's: Board of managers 0 0 Board of directors, incl. elected by the staff 1,206 1,086 Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 PA G E 6 0 R I N G K J OE B I N G L A N D B O B A N K A / S 34 Related parties - continued The board of directors' and the board of managers' shareholdings* in Ringkjoebing Landbobank at the end of the year The board of directors: Jens Lykke Kjeldsen 5,815 5,415 Gravers Kjaergaard 6,663 6,663 Gert Asmussen 4,528 4,028 Keld Hansen 16,636 15,636 Inge Sandgrav Bak 2,488 2,488 Martin Krogh Pedersen 6,501 6,501 Bo Bennedsgaard 530 427 Gitte E. S. Vigsoe 30 28 The board of managers: Bent Naur 16,944 16,492 John Fisker 15,192 14,740 * Stated in accordance with the rules on insiders. 35 Current value of fi nancial instruments Financial instruments are measured in the balance sheet at either current value or amortised cost price (with consideration to risk cover that fulfi l the conditions applying to hedging). The current value is the amount at which a fi nancial asset can be sold or the amount at which a fi nancial liability can be redeemed between agreed independent parties. The current values of fi nancial 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 fi nancial instruments which are not valued on active markets are calculated on the basis of generally recognised methods of valuation. Shares etc. and derivative fi nancial instruments are measured in the accounts at market value such that included book values correspond to current values. The write-downs on loans are assessed such that they correspond to changes in credit quality. The difference from current value is assessed as fees and commissions received, costs incurred in lending activities, and, for fi xed-interest loans, the value adjustment which is independent of the interest level and which can be calculated by comparing the actual market interest rate with the nominal rate applying to the loans. The current value of claims on credit institutions and central banks is determined under the same method as for loans, but the bank has not currently made any write-downs on claims on credit institutions and central banks. Issued bonds and subordinated debt are measured at amortised cost price. The difference between book and current values is calculated on the basis of prices on the market for own listed issues. For variable-interest fi nancial 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 fi xed-interest fi nancial 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. Note End Dec. 2011 End Dec. 2010 no. Number of shares Number of shares N O T E S T O T H E A N N U A L R E P O R T A N N U A L R E P O R T 2 0 1 1 PA G E 6 1 End Dec. 2011 End Dec. 2010 DKK 1,000 DKK 1,000 Note End Dec. 2011 End Dec. 2010 no. Book value Current value Book value Current value DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 35 Current value of fi nancial instruments - continued Financial assets Cash in hand+claims at call on central banks 33,935 33,935 59,597 59,597 Claims on credit institut. and central banks* 1,318,375 1,318,376 2,657,193 2,657,231 Loans and other debtors at amort. cost price* 12,777,305 12,828,656 13,180,721 13,222,857 Bonds at current value* 2,774,316 2,774,316 1,556,233 1,556,233 Shares etc. 249,592 249,592 257,780 257,780 Derivative fi nancial instruments 267,853 267,853 395,882 395,882 Total fi nancial assets 17,421,376 17,472,728 18,107,406 18,149,580 Financial liabilities Debt to credit institutions and central banks* 1,243,364 1,242,551 2,634,219 2,635,136 Deposits and other debts* 12,798,121 12,835,712 11,690,377 11,702,381 Issued bonds at amortised cost price*/** 343,374 334,133 342,522 342,667 Derivative fi nancial instruments 159,683 159,683 378,188 378,188 Subordinated debt*/** 420,519 396,256 715,380 706,516 Total fi nancial liabilities 14,965,061 14,968,335 15,760,686 15,764,888 * 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. 36 Hedging The following are hedged: Fixed interest claim on a credit institution, fi xed interest loans, fi xed interest deposits, issued bonds at amortised cost price, fi xed interest subordinated loan capital, fl oating interest subordinated loan capital and fi xed interest hybrid core capital Risk cover: Interest rate risk and foreign exchange risk Book values: Claim on a credit institution 30,077 29,197 Loans 54,291 67,182 Deposits 306,726 314,635 Issued bonds at amortised cost price 105,121 103,925 Subordinated loan capital 198,014 489,040 Hybrid core capital 214,472 208,116 Cover is thus: Interest and currency swaps - total synthetic principal 808,971 1,157,457 Total current value 22,355 24,714 37 Risks and risk management As described in the section on risk >>Risks and risk management<< in the management report contained in the annual report, Ringkjoebing Landbobank is exposed to various types of risk. See the section on risks on pages 18-29 of the management report for a description of fi nancial risks and policies and objectives for their management. The following notes to the annual report contain some additional information and a more detailed description of the bank's credit and market risks. PA G E 6 2 R I N G K J OE B I N G L A N D B O B A N K A / S 38 Credit risk Maximum credit exposure classifi ed by balance sheet and off-balance sheet items Balance sheet items Cash in hand and claims at call on central banks 33,935 59,597 Claims on credit institutions and central banks 1,314,318 2,654,707 Loans and other debtors at amortised cost price 12,746,560 13,151,216
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DJ DGAP-UK-Regulatory: Annual Report 2011, -14-
Bonds at current value 2,755,912 1,546,282 Shares etc. 249,054 257,253 Capital shares in associated companies 538 527 Other assets, including derivative fi nancial instruments 360,822 490,427 17,461,139 18,160,009 Off-balance sheet items Guarantees (contingent liabilities) 1,052,222 1,041,983 1,052,222 1,041,983 Maximum credit exposure excluding unutilsed credit facilities 18,513,361 19,201,992 Unutilised credit facilities 3.338.861 3,054,065 Total maximum credit exposure 21.852.222 22,256,057 A more detailed division of the items >>Loans and other outstanding debts at amortised cost price<<, >>Guarantees<< and >>Unutilised credit facilities<< are given below. There is also a classifi cation covering only the items >>Loans made and other outstandings at amortised cost price<< and >>Guarantees<<. Loans, guarantees and unutilised credit facilities by sector Loans and guarantees in percent, end of year, classifi ed by sector/business Public authorities 0.0 0.0 Business Agriculture, hunting and forestry Cattle farming etc. 3.2 3.7 Pig farming etc. 2.8 2.7 Other agriculture, hunting and forestry 4.6 4.6 Fishing 1.5 1.4 Mink production 1.2 1.4 Industry and raw materials extraction 2.9 3.0 Energy supply - Demnark* 6.8 16.3 Energy supply - foreign 12.6 - Building and construction 1.6 1.9 Trade 4.7 4.2 Transport, hotels and restaurants 1.9 2.2 Information and communication 0.2 0.2 Financing and insurance 7.3 7.7 Real estate 10.1 8.8 Other business 8.0 8.1 Total business 69.4 66.2 Private 30.6 33.8 Total 100.0 100.0 N O T E S T O T H E A N N U A L R E P O R T End Dec. 2011 End Dec. 2010 Per cent Per cent Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 A N N U A L R E P O R T 2 0 1 1 PA G E 6 3 38 Credit risk - continued Loans and guarantees by sectors Loans and guarantees in percent, end of year, by sector/business Public authorities 0.0 0.0 Business Agriculture, hunting and forestry Cattle farming etc. 3.5 4.0 Pig farming etc. 2.9 2.8 Other agriculture, hunting and forestry 4.4 4.4 Fishing 1.7 1.5 Mink production 1.3 1.4 Industry and raw materials extraction 2.9 2.8 Energy supply - Demnark* 7.6 18.6 Energy supply - foreign 14.2 - Building and construction 1.5 1.8 Trade 3.9 3.6 Transport, hotels and restaurants 2.1 2.4 Information and communication 0.2 0.2 Financing and insurance 7.0 8.1 Real estate 11.4 9.4 Other business 7.3 7.3 Total business 71.9 68.3 Private 28.1 31.7 Total 100.0 100.0 * The item >>Energy supply<< is divided into Denmark and foreign for 2011. In the comparative fi gures for 2010, the bank's entire commitment is given under Energy supply - Denmark, but it should be noted that a substantial quantity of this concerns foreign countries. The classifi cation by business was made on the basis of Statistics Denmark's sector codes etc. Comments on distribution by business Ringkjoebing Landbobank has historically always operated on the basis of a conservative credit policy. The bank's judgment is that this is refl ected in the quality of the credit in the bank's loans, which is generally judged to be high. The bank's customers' ability to repay is generally good, and in combination with the bank's robust security cover on many commitments, the result is a low credit risk. Private customers account for a total of 28.1% of Ringkjoebing Landbobank's total loans and guarantees. Most of these customers are in the bank's core area in Central and West Jutland and they are characteristically good credit risks. This is partly due to a moderately negative trend in prices for real estate and the associated proportion of income spent on housing, which is lower than in East Jutland and the capital city area. The primary security received from private customers is real estate (private homes). The bank has a well-diversifi ed agricultural portfolio with 2.9% of the total loans and guarantees on pig farmers, 3.5% on cattle and 4.4% on others. The economic conditions for agriculture as a whole remain diffi cult, and although the bank's farming customers have relatively less debt than in the agriculture sector as a whole, the situation is diffi cult. However, the returns from agriculture at the beginning of 2012 have generally improved relative to the previous year. In general, however, the return from farming remains weak, and the bank has allocated considerable provisions for write-downs on this sector. Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 PA G E 6 4 R I N G K J OE B I N G L A N D B O B A N K A / S N O T E S T O T H E A N N U A L R E P O R T 38 Credit risk - continued The security consists primarily of a mortgage in the farm (land, buildings and other production apparatus) and secondarily of assignment of subsidy and other accounts etc. Loans for energy supply comprise a total of 21.8%, and energy is thus the sector with the highest proportion of the bank's loans. Most of the exposure in this group is the fi nancing of wind turbines, which has been a core area of specialisation in the bank for more than 20 years. Exposure within energy supply abroad is very predominantly to wind turbines erected in Germany. The bank's concept for the fi nancing of wind turbines is based on fi rst mortgage fi nancing. The concept includes a legal and commercial due diligence, which provides a high degree of security. Fixed prices on the German market provide further security that the bank's commitment can be honoured. Losses suffered by the bank in this sector have been minimal, and the fi nancial crisis has confi rmed that the risk in this sector is limited. The security is primarily a fi rst mortgage in the wind turbine and assignment of electricity payments and any subsidy. Real estate accounts for a total of 11.4% of the bank's loan and guarantee debtors. This is a relatively modest proportion compared with other banks, refl ecting the bank's prudent approach to this sector. The loan and the securities can be divided mainly into the following groups: 1) Loans with fi rst priority mortgage in property (the majority of the loans) 2) Loans with second priority mortgage in property and a strong tenant with an irrevocable lease. In the case of second priority fi nancing, the bank places weight on the debtor's ability to repay the debt before expiration of the lease. Both types of loan have demonstrated their strength during the fi nancial crisis, and the bank is comfortable with this. Financing and insurance account for a total of 7.0% of the bank's loan and guarantee debtors and they include the bank's concept for the mortgaging of securities. The primary security in the concept consists of listed securities. The concept has defi nitely shown its strength in the particularly volatile periods on the fi nancial markets which the fi nancial crisis has caused. Description of securities Ringkjoebing Landbobank wishes as far as possible to reduce the risk in connection with business transactions entered into with the bank's customers by taking security in the form of a mortgage in physical assets, securities, bank deposits etc. and receiving pledges, guarantees and letters of subordination. The most frequently used securities are mortgages in real estate and wind turbines, and negotiable securities. The bank continuously monitors the value of securities received. The bank takes a conservative approach to the valuation of the mortgage value of securities received. A deduction is thus always made from the value to cover the risk on realisation, costs etc. Note no. A N N U A L R E P O R T 2 0 1 1 PA G E 6 5 38 Credit risk - continued 2011 Nominal securities by sector and business for commitments which have not been written down Public authorities 0 3,445 0 3,445 Business: Agriculture, forestry and fi shing 271,178 1,263,812 455,128 1,990,118 Industry and raw materials extraction 45,443 75,814 232,302 353,560 Energy supply 69,991 501,561 1,957,750 2,529,302 Building and construction 9,780 104,304 111,423 225,507 Trade 56,909 204,426 146,766 408,100 Transport, hotels and restaurants 68,165 71,053 182,959 322,177 Information and communication 2,767 11,280 5,213 19,260 Financing and insurance 751,015 390,014 19,196 1,160,225 Real estate 120,791 1,290,412 2,424 1,433,625 Other business 460,337 592,821 112,471 1,165,628 Total business 1,856,377 4,505,496 3.245,631 9,607,504 Private 745,870 2,720,083 268,890 3,734,844 Total 2,602,247 7,229,024 3,514,521 13,345,793 2010 Nominal securities by sector and business for commitments which have not been written down Public authorities 0 3,195 0 3,195 Business: Agriculture, forestry and fi shing 301,567 1,267,613 465,130 2,034,310 Industry and raw materials extraction 25,616 77,919 224,624 328,159 Energy supply 52,485 543,977 1,957,750 2,554,212 Building and construction 29,320 137,182 108,518 275,021 Trade 80,353 198,474 150,927 429,755 Transport, hotels and restaurants 34,660 78,780 236,282 349,721 Information and communication 5,391 9,783 3,706 18,880 Financing and insurance 712,704 381,490 20,139 1,114,333 Real estate 121,215 1,232,718 13,871 1,367,804 Other business 401,841 443,125 108,624 953,590 Total business 1,765,152 4,371,061 3,289,572 9,425,785 Private 927,755 2,764,759 266,560 3,959,073 Total 2,692,907 7,139,015 3,556,132 13,388,054 The nominal collateral values are not necessarily indicative of the actual collateral value. Note no. Securities and cash Real estate Movable Total DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 Securities and cash Real estate Movable Total DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 PA G E 6 6 R I N G K J OE B I N G L A N D B O B A N K A / S
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DJ DGAP-UK-Regulatory: Annual Report 2011, -15-
N O T E S T O T H E A N N U A L R E P O R T Note no. 38 Credit risk - continued The quality of loans and guarantees which are neither in arrears nor written down The bank has a credit rating on a large number of customers. In the case of private and small business customers, the rating is based on statistical models (based on the probability of default), while there is an expert model for major businesses. There are 7-10 different factors in the statistical models, including information on the customer's assets and a quantity of behavioural data. These data are selected from among a large number of possible factors as these factors best describe defaults on previous commitments. The expert model for business customers is based on information on the customer's creditworthiness and earning ability. The model consists of a general model used for the group as a whole plus three variants of the model which are specially adapted to exposure to wind turbines, agriculture and properties. Within loans and guarantees which are neither in arrears nor written down, 91% of the commitments are rated. The fi gure below indicates that 62% of the rated exposure has a high credit quality. The unrated commitments account for over DKK 1.1 billion. This group consists mainly of business customers and it covers a wide range of sectors. Agriculture is a smaller proportion of this group than in the bank's classifi cation of sectors as a whole, and the credit risk on the group is judged to be modest. The further development of the bank's models during 2011 makes a direct comparison with 2010 diffi cult. The bank's assessment is, however, that the quality of credit for that part of the loan which has not been written down is unchanged relative to 2010. 7 000 8.000 Distribution of loans and guarantees without write-downs or arrears , 7,221 4 000 5.000 6.000 7.000 DKK , , , 3,418 1 000 2.000 3.000 4.000 Million D , , , 940 1,158 0 1.000 High Medium Low Not classified Credit quality , A N N U A L R E P O R T 2 0 1 1 PA G E 6 7 38 Credit risk - continued Distribution by time from the due date for loans in arrears Public authorities 10 0 10 Business: Agriculture, forestry and fi shing 14,733 87 14,820 Industry and raw materials extraction 1,067 66 1,133 Energy supply 1,338 3 1,341 Building and construction 851 372 1,223 Trade 1,483 150 1,633 Transport, hotels and restaurants 827 66 893 Information and communication 570 26 596 Financing and insurance 265 1 266 Real estate 15,595 158 15,753 Other business 3,738 295 4,033 Total business 40,477 1,224 41,701 Private 23,009 2,289 25,298 Total 2011 63,486 3,513 66,999 Total 2010 14,712 1,329 16,041 Under Over 90 days 90 days Total DKK 1.000 DKK 1.000 DKK 1.000 Note no. PA G E 6 8 R I N G K J OE B I N G L A N D B O B A N K A / S 38 Credit risk - continued The value of loans where individual write-downs have been made Credit exposure by reason for write-down Public authorities 0 0 0 0 0 0 Business: Agriculture, forestry and fi shing 112,335 196,921 44,537 44,201 397,994 275,556 Industry and raw materials extraction 5,272 5,700 795 59 11,826 6,872 Energy supply 643 0 0 0 643 405 Building and construction 9,316 5,169 1,260 4,019 19,764 18,466 Trade 15,417 12,641 1,846 368 30,272 18,996 Transport, hotels and restaurants 14,982 2,872 1,031 7,531 26,416 17,777 Information and communication 159 1,196 32 0 1,387 1,057 Financing and insurance 15,321 28,761 7,817 6,970 58,869 33,261 Real estate 17,952 4,858 0 11,081 33,891 19,823 Other business 51,185 21,574 1,406 13,579 87,744 47,590 Total business 242,582 279,692 58,724 87,808 668,806 439,803 Private 100,088 94,442 40,577 10,573 245,680 142,587 Total credit exposure 2011 342,670 374,134 99,301 98,381 914,486 Total credit exposure 2010 398,407 212,541 116,892 128,352 856,192 2011 Individual write-downs 219,842 224,671 78,541 59,336 582,390 Security values for commitments which have been written down 63,604 71,807 25,139 24,158 184,709 2010 Individual write-downs 233,696 124,662 79,310 96,156 533,824 Security values for commitments which have been written down 58,992 40,819 18,093 21,182 139,087 The bank is particularly focused on covering the risk on commitments which have been written down. Under the bank's credit policy, these commitments must be covered to the greatest possible extent by securities. When determining the need for a write-down, the value of securities is included at the prudently expected net realisation value. The bank only includes the ability to make payments over and above the value of securities to a modest extent when determining the need for a write-down. Major Total Individual fi nancial Breach Relaxation Probable credit write-- diffi culties of contract of terms bankruptcy exposure downs DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 Major fi nancial Breach Relaxation Probablediffi culties of contract of terms bankruptcy Total DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 DKK 1.000 N O T E S T O T H E A N N U A L R E P O R T Note no. A N N U A L R E P O R T 2 0 1 1 PA G E 6 9 38 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 written-down loans Balance for loans and other debtors before write-downs 835,803 856,192 Write-downs -503,286 -501,768 Balance for loans and other debtors after write-downs 332,517 354,424 Group written-down loans Balance for loans and other debtors before write-downs 12,143,747 12,449,771 Write-downs 67,466 -31,211 Balance for loans and other debtors after write-downs 12,076,281 12,418,560 Credit risk on derivative fi nancial instruments Positive market value (by counterpart risk) after netting Counterpart riskweight 20% 203,886 246,344 Counterpart riskweight 75% 78,344 90,711 Counterpart riskweight 100% 106,426 171,530 Counterpart riskweight 150% 0 2,633 Total counterpart riskweight 388,656 511,218 39 Foreign exchange risk Total assets in foreign currency 6,473,073 7,679,708 Total liabilities in foreign currency 3,189,031 4,632,581 Foreign exchange indicator 1 23,602 12,262 Foreign exchange indicator 1 in % of core capital after deductions (%) 0.9 0.5 Foreign exchange indicator 2 586 259 Foreign exchange indicator 2 in % of core capital after deductions (%) 0.0 0.0 40 Interest rate risk Total interest rate risk 17,530 2,664 Total interest rate risk (%) 0.7 0.1 Interest rate risk by the foreign currencies: DKK 17,097 11,127 EUR 3,941 -7,746 NOK -3,437 0 CHF -261 -829 USD 193 123 SEK 8 0 JPY 0 -9 Other currencies -11 -2 Total 17,530 2,664 Note End Dec. 2011 End Dec. 2010 no. DKK 1,000 DKK 1,000 PA G E 7 0 R I N G K J OE B I N G L A N D B O B A N K A / S 41 Value at Risk/Market risk Ringkjoebing Landbobank uses a Value at Risk (VaR) model as a sensitivity analysis for market risks. The model is a parametric VaR model based on a historic analysis of the covariation (the correlations) between the prices of various fi nancial assets etc. The model combines the historical knowledge of the covariation on the fi nancial markets with the bank's current positions, and on this basis calculates the risk of losses for a forthcoming ten-day period. The calculation includes the bank's positions with respect to interest, foreign currencies and listed shares, while positions in sector shares and unlisted capital shares are not included. The calculated VaR thus indicates the bank's sensitivity to losses on the basis of its positions. The model is used as one of a number of tools in the bank's management of market risks. Reference is made to pages 26-27 of this annual report for further description of the model etc. DKK million Average Minimum Maximum End of year Year/Risk VaR-fi gure VaR-fi gure* VaR-fi gure* VaR-fi gure 2011 Interest 8.2 0.3 21.5 13.5 Foreign currency 0.4 0.2 0.4 0.3 Share 4.0 2.8 3.3 2.1 Diversifi cation -4.2 -1.6 -4.1 -2.7 Total VaR-fi gure 8.4 1.7 21.1 13.2 2010 Interest 7.7 0.7 17.6 3.8 Foreign currency 1.0 0.3 0.2 0.5 Share 3.3 3.1 2.8 2.4 Diversifi cation -4.1 -1.6 -3.8 -2.5 Total VaR-fi gure 7.9 2.5 16.8 4.2 2009 Interest 17.4 4.8 27.8 11.6 Foreign currency 0.5 0.2 0.3 0.1 Share 5.3 3.2 5.9 6.2 Diversifi cation -5.7 -2.7 -7.1 -5.9 Total VaR-fi gure 17.5 5.5 26.9 12.0 * Determined by the total VaR-fi gure. Sensitivity analysis of sector shares Sector shares cf. note 18 214,583 Effect of a 10% price change on the resul 21,458 N O T E S T O T H E A N N U A L R E P O R T Note no. A N N U A L R E P O R T 2 0 1 1 PA G E 7 1 42 Derivative fi nancial instruments By residual maturity DKK 1,000 Over 3 month Up to 3 month and up to 1 year Net Net Nominal market Nominal market value value value value Foreign-exchange contracts Spot, purchase 48,090 -27 Spot, sale 41,733 -12 Forward transactions/futures, purchase 2,684,513 41,521 171,526 15,348 Forward transactions/futures, sale 6,494,835 10,251 171,533 3,573 Swaps 33,377 63 Options, purchase Options, sale Interest-rate contracts Spot, purchase 214,579 712 Spot, sale 63,956 -603 Forward transactions/futures, purchase 10,763 219 Forward transactions/futures, sale 33,022 -360 Swaps 430,207 1,983 Options, purchase 27,135 148 71,855 1,760 Options, sale 27,135 -148 71,855 -1,760 Share contracts Spot, purchase 13,249 702 Spot, sale 12,704 -708 Over 1 year and up to 5 years Over 5 years Net Net Nominal market Nominal market value value value value Foreign-exchange contracts Spot, purchase
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DJ DGAP-UK-Regulatory: Annual Report 2011, -16-
Spot, sale Forward transactions/futures, purchase Forward transactions/futures, sale Swaps 247,784 16,751 219,533 -116 Options, purchase Options, sale Interest-rate contracts Spot, purchase Spot, sale Forward transactions/futures, purchase Forward transactions/futures, sale Swaps 1,394,828 -9,921 772,364 12,724 Options, purchase 109,843 3,693 257,244 9,110 Options, sale 109,843 -3,693 257,244 -9,110 Note no. PA G E 7 2 R I N G K J OE B I N G L A N D B O B A N K A / S Derivative fi nancial instruments - continued DKK 1,000 Total net Total nominal value market value 2011 2010 2011 2010 Foreign-exchange contracts Spot, purchase 48,090 9,746 -27 -5 Spot, sale 41,733 25,323 -12 125 Forward transactions/futures, purchase 2,856,039 3,629,512 56,869 78,308 Forward transactions/futures, sale 6,666,368 7,353,402 13,824 -93,685 Swaps 500,694 973,953 16,698 31,876 Options, purchase Options, sale Interest-rate contracts Spot, purchase 214,579 265,589 712 -243 Spot, sale 63,956 135,768 -603 -476 Forward transactions/futures, purchase 10,763 36,420 219 295 Forward transactions/futures, sale 33,022 24,938 -360 -238 Swaps 2,597,399 2,233,991 3,886 1,733 Options, purchase 466,077 928,642 14,711 14,820 Options, sale 466,077 928,642 -14,711 -14,820 Share contracts Spot, purchase 13,249 22,863 702 -154 Spot, sale 12,704 22,426 -708 158 Net market value, total 91,200 17,694 Market value Average market value Positive Negative Positive Negative 2011 2010 2011 2010 2011 2010 2011 2010 Foreign-exchange contracts Spot, purchase 63 2 90 7 323 217 4,329 1,411 Spot, sale 83 127 95 2 450 312 479 509 Forward transactions/ futures, purchase 63,253 132,059 6,384 53,751 52,194 103,295 62,825 57,359 Forward transactions/ futures, sale 52,693 71,606 38,869 165,291 130,140 71,681 63,283 104,221 Swaps 43,498 78,815 26,800 46,939 50,275 62,711 35,833 53,692 Options, purchase Options, sale Interest-rate contracts Spot, purchase 1,051 104 339 347 598 256 369 520 Spot, sale 133 7 736 483 205 147 612 140 Forward transactions/ futures, purchase 219 295 109 112 8 Forward transactions/ futures, sale 360 238 25 2 340 67 Swaps 91,293 97,166 87,407 95,433 71,042 99,431 79,150 104,659 Options, purchase 14,711 14,820 13,558 21,152 Options, sale 14,711 14,820 13,558 21,175 Share contracts Spot, purchase 774 362 72 516 1,145 841 396 254 Spot, sale 82 519 790 361 395 299 3,889 689 Total 267,853 395,882 176,653 378,188 320,459 360,456 265,071 344,696 Provision of security under CSA agreement 0 0 -16,970 0 Total other shares/ other liabilities 267,853 395,882 159,683 378,188 All contracts of derivative fi nancial instruments are non-guanteed contracts. N O T E S T O T H E A N N U A L R E P O R T PA G E 7 4 R I N G K J OE B I N G L A N D B O B A N K A / S F I V E Y E A R M A I N F I G U R E S Summary DKK 1,000 2011 2010 2009 2008 2007 Profi t and loss account Interest receivable 858,257 836,339 993,756 1,221,165 1,031,830 Interest payable 245,291 241,954 377,728 669,149 570,690 Net income from interest 612,966 594,385 616,028 552,016 461,140 Dividend on capital shares etc. 1,111 1,219 3,243 1,491 2,386 Income from fees and commissions 158,303 170,389 149,628 176,118 225,353 Fees and commissions paid 24,312 25,996 23,823 28,464 35,599 Net income from interest and fees 748,068 739,997 745,076 701,161 653,280 Value adjustments +16,386 +52,159 +58,130 -43,577 +17,965 Other operating income 4,535 3,893 5,351 4,863 7,443 Staff and administration costs 244,068 236,374 235,604 236,056 229,755 Amortisations, depreciations and write-downs on intangible and tangible assets 4,375 3,219 2,424 2,420 4,647 Other operating costs 381 195 56 86 16 Costs bank package I and Deposit Guarantee Fund 11,178 46,590 55,785 16,148 0 Write-downs on loans -128,799 -138,217 -158,600 -77,223 +10,791 Write-downs on national bank package I etc. 0 -33,152 -51,173 -12,016 0 Result of capital shares in associated companies +11 +14 -59 -5 -11 Profi t before tax 380,199 338,316 304,856 318,493 455,050 Tax 94,128 81,443 72,775 78,495 106,730 Profi t after tax 286,071 256,873 232,081 239,998 348,320 A N N U A L R E P O R T 2 0 1 1 PA G E 7 5 Summary DKK 1,000 End 2011 End 2010 End 2009 End 2008 End 2007 Balance sheet Assets Cash in hand and claims on credit institutions and central banks 1,348,253 2,714,304 2,534,722 2,087,959 4,337,064 Loans and other debtors at amortised cost price 12,746,560 13,151,216 13,047,212 13,897,101 14,134,637 Securities 3,005,504 1,804,062 1,936,663 1,553,741 914,421 Tangible assets 79,615 80,092 79,644 77,730 75,126 Other assets 369,091 497,530 329,715 385,222 172,480 Total assets 17,549,023 18,247,204 17,927,956 18,001,753 19,633,728 Liabilities and equity Debt to credit institutions and central banks Term to maturity under 1 year 285,028 636,326 699,732 2,077,112 4,307,206 Term to maturity over 1 year 957,047 1,995,864 2,294,991 3,224,050 3,132,755 Deposits and other debts 12,755,415 11,661,654 11,187,470 9,072,875 9,161,775 Issued bonds 338,958 337,617 557,337 478,341 474,287 Other liabilities 301,996 593,153 365,021 652,505 285,348 Provisions for liabilities 14,973 13,247 72,238 21,096 19,933 Subordinated debt 412,486 696,999 695,394 690,984 473,863 Share capital 25,200 25,200 25,200 25,200 26,200 Reserves 2,457,920 2,287,144 2,030,573 1,759,590 1,752,361 Total shareholders' equity 2,483,120 2,312,344 2,055,773 1,784,790 1,778,561 Total liabilities and equity 17,549,023 18,247,204 17,927,956 18,001,753 19,633,728 Contingent liabilities etc. Contingent liabilities 1,052,222 1,041,983 1,485,676 2,386,213 4,803,839 Binding agreements 0 0 0 0 3,995 Total contingent liabilities etc. 1,052,222 1,041,983 1,485,676 2,386,213 4,807,834 PA G E 7 6 R I N G K J OE B I N G L A N D B O B A N K A / S 2011 2010 2009 2008 2007 Solvency: Solvency ratio % 21.4 22.4 20.2 16.3 13.0 Core capital ratio % 19.8 18.6 16.6 13.0 11.2 Earnings: Pre-tax return on equity % 15.9 15.5 15.9 17.9 26.1 Return on equity after tax % 11.9 11.8 12.1 13.5 20.0 Income/cost ratio DKK 1.98 1.74 1.61 1.93 3.04 Market risk: Interest rate risk % 0.7 0.1 0.6 1.2 1.0 Foreign exchange position % 0.9 0.5 3.4 5.6 2.1 Foreign exchange risk % 0.0 0.0 0.1 0.0 0.0 Liquidity risk: Excess cover relative to statutory liquidity requirements % 140.5 231.8 205.6 139.1 161.4 Loans and write-downs thereon relative to deposits % 105.0 117.6 120.8 157.1 157.4 Credit risk: Loans relative to shareholders' equity 5.1 5.7 6.3 7.8 7.9 Growth in loans for the year % -3.1 0.8 -6.1 -1.7 10.8 Total large exposures % 41.7 10.2 0.0 12.1 38.3 Cumulative write-down percentage % 4.5 3.8 3.1 2.1 1.5 Write-down percentage for the year % 0.89 0.94 1.16 0.48 -0.06 Proportion of debtors at reduced interest % 0.4 0.4 0.4 0.1 0.1 Share return: Profi t for the year after tax per share*/*** DKK 1,146.6 1,019.3 921.0 933.8 1,324.4 Book value per share*/** DKK 10,055 9,193 8,172 7,382 7,053 Dividend per share* DKK 262 240 0 0 600 Share price relative to profi t for the year per share*/*** 10.1 14.2 13.2 6.6 13.0 Share price relative to book value per share*/** 1.15 1.58 1.49 0.84 2.43 * 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 calculated as a simple average of the shares at the beginning of the year and at the end of the year. F I V E Y E A R K E Y F I G U R E S A N N U A L R E P O R T 2 0 1 1 PA G E 7 7 Defi nitions of the offi cial key fi gures/ratios from the Danish Financial Supervisory Authority Solvency ratio Capital base after deductions in per cent of total risk weighted assets. Core capital ratio Core capital after deductions (incl. hybrid core capital) in per cent of total risk weighted assets. Pre-tax return on equity Profi t 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 Profi t after tax in per cent of average shareholders' equity. The average shareholders' equity is calculated as a simple average of the shareholders' equity at the beginning of the year and at the end of the year. Income/cost ratio Net income from interest and fees, value adjustments, other operating income and result of capital shares in associated companies in per cent of staff and administration costs, amortisation, depreciation and write-downs on intangible and tangible assets, other operating costs and write-downs on loans and debtors etc. Interest rate risk Interest rate risk in per cent of core capital after deductions (incl. hybrid core capital). Foreign exchange position Foreign exchange indicator 1 in per cent of core capital after deductions (incl. hybrid core capital). Foreign exchange risk Foreign exchange indicator 2 in per cent of core capital after deductions (incl. hybrid core capital). Excess coverage relative to statutory liquidity requirements Cash in hand, demand deposits with the Danish National Bank, fully secured and liquid on-demand credit balance in credit institutions and insurance companies, unencumbered certifi cates 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.
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DJ DGAP-UK-Regulatory: Annual Report 2011, -17-
Loans and write-downs thereon relative to deposits Loans + write-downs thereon in per cent of deposits. Loans relative to shareholders' equity Loans/shareholders' equity. Growth in loans for the year Growth in loans from the beginning of the year to the end of the year, in per cent. Total large exposures The total sum of large exposures in per cent of the capital base after deductions. Cumulative write-down percentage Write-downs on loans and provisions for losses on guarantees in per cent of loans + write-downs on loans + guarantees + provisions for losses for guarantees. Write-down percentage for the year Write-downs etc. for the year in per cent of loans + write-downs on loans + guarantees + provision for losses on guarantees. Proportion of debtors at reduced interest Proportion of debtors at reduced interest before write-downs etc. in per cent of loans + write-downs on loans + guarantees + provision for losses on guarantees. Profi t for the year after tax per share*/*** Profi t 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 profi t for the year per share*/*** Share price/profi t for the year per share. Share price relative to book value per share*/** Share price/book value per share. */**/***: See page 74. PA G E 7 8 R I N G K J OE B I N G L A N D B O B A N K A / S A N N U A L R E P O R T 2 0 1 1 PA G E 7 9 Page 80 Shareholders' committee 81 Board of directors 83 Board of managers 84 Company information 85 Stock exchange announcements 85 Financial calendar 86 The bank's branches etc. OTHER INFORMATION PA G E 8 0 R I N G K J OE B I N G L A N D B O B A N K A / S SHAREHOLDERS' COMMITTEE Shareholders' committee Jens Moeller Nielsen, manager, Ringkoebing, - born 1956 chairman of the shareholders' committee Else Kirkegaard Hansen, senior master, Ringkoebing, - born 1954 deputy chairman of the shareholders' committee Hejne F. Andersen, industrialist, Ringkoebing - born 1954 Jens Arnth-Jensen, manager, Holte - born 1948 Gert Asmussen, printer, Tarm - born 1950* Inge Sandgrav Bak, fi nancial manager, Ringkoebing - born 1960* Claus H. Christensen, farmer, Lem - born 1961 Claus Dalgaard, manager, Ringkoebing - born 1962 Per Dam, accountant, Ulfborg - born 1952 Ole K. Erlandsen, butcher, Herning - born 1962 Keld Hansen, grocer, Soendervig - born 1948* Niels Ole Hansen, manager, Ringkoebing - born 1951 Tonny Hansen, college principal, Ringkoebing - born 1958 Leif Haubjerg, farmer, No - born 1959 Erik Jensen, haulage contractor, Skjern - born 1965 Niels Esper Kamp, farmer, Stadil - born 1957 Jens Lykke Kjeldsen, timber merchant, Ringkoebing - born 1950* Niels Kjeldtoft, teacher, Spjald - born 1945 Gravers Kjaergaard, farmer, Groenbjerg - born 1952* Lars Moeller, municipal chief executive, Holstebro - born 1957 Martin Krogh Pedersen, manager, Ringkoebing - born 1967* Ole Christian Pedersen, manager, Vostrup - born 1950 Kristian Skannerup, industrialist, Tim - born 1959 Joergen Kolle Soerensen, car dealer, Hvide Sande - born 1970 Johan Chr. OEllgaard, industrialist, Stauning - born 1947 Anne-Marie Sannerum, manager, Billund - born 1968 * Member of the board of directors A N N U A L R E P O R T 2 0 1 1 PA G E 8 1 Board of directors Jens Lykke Kjeldsen, timber merchant, Ringkoebing, chairman of the board of directors - born 1950 Member of the bank's auditing committee Member of the board of directors since 1995 End of current term of election to the board of directors: 2012 Other managerial activities - member of the board of management of: A/S Henry Kjeldsen A/S Miljoepark Vest Aktieselskabet af 1. august 1989 Asta og Henry Kjeldsens Familiefond Danbuy A.m.b.A. Henry Kjeldsen, Ringkoebing Toemmerhandel A/S VT Hallen A/S Gravers Kjaergaard, farmer, Groenbjerg, deputy chairman of the board of directors - born 1952 Member of the bank's auditing committee Member of the board of directors since 2002 End of current term of election to the board of directors: 2013 No other managerial activities Gert Asmussen, printer, Tarm - born 1950 Chairman of the bank's auditing committee 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 board of management of: A. Rasmussens Bogtrykkeri ApS Gert Asmussen Holding A/S Gullanders Bogtrykkeri A/S Tarm Bogtryk A/S Tarm Elvaerk Net A/S Tarm Ugeblad ApS TB Anlaeg ApS Vestjysk Rotation A/S Vinderup Invest ApS Keld Hansen, grocer, Soendervig - born 1948 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 board of management of: A/S Miljoepark Vest Beach Bowl A/S Investeringsselskabet Soendervig ApS Norddan-Soendervig ApS Soendervig Ejendomsselskab ApS Soendervig Holding ApS Soendervig Supermarked ApS B O A R D O F D I R E C T O R S PA G E 8 2 R I N G K J OE B I N G L A N D B O B A N K A / S Board of directors - continued Inge Sandgrav Bak, fi nancial manager, Ringkoebing - born 1960 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 board of management of: JSB International A/S JSB Rindum A/S JSB Composite (Zhuozhou) Co., Ltd. Martin Krogh Pedersen, manager, Ringkoeing - born 1967 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 board of management of: K. P. Holding A/S and one 100% owned subsidiary Mhkp Holding ApS and three 100% owned subsidiary PF Management Holding ApS and two 100% owned subsidiary Techo A/S Vestjysk Udvikling A/S Bo Bennedsgaard, IT consultant, Holstebro, elected by the employees - born 1972 Member of the board of directors since 2007 End of current term of election to the board of directors: 2015 No other managerial activities Gitte Elisa Sigersmunda Hoegholm Vigsoe, Sagsbehandler, Holstebro, elected by the employees - born 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 B O A R D O F D I R E C T O R S A N N U A L R E P O R T 2 0 1 1 PA G E 8 3 BOARD OF MANAGERS Board of managers Bent Naur, executive general manager - born 1947 Member of the board of managers since 1987 Member of the boards of directors of: Bankdata, Fredericia Det Private Beredskab, Koebenhavn Lokale Pengeinstitutter, Koebenhavn JN Data A/S, Silkeborg Nykredit Holding A/S, Koebenhavn PRAS A/S, Koebenhavn Totalkredit A/S, Koebenhavn Totalkredit Realkreditfond, Koebenhavn John Bull Fisker, general manager - born 1964 Member of the board of managers since 1999 Member of the boards of directors of: BI Holding A/S, Koebenhavn BI Asset Management Fondsmaeglerselskab A/S, Koebenhavn BankInvest Private Equity A/S, Koebenhavn Letpension A/S, Koebenhavn Member of the customer board of: PFA Pension A/S, Copenhagen PA G E 8 4 R I N G K J OE B I N G L A N D B O B A N K A / S COMPANY INFORMATION Ringkjoebing Landbobank Aktieselskab Torvet 1 DK-6950 Ringkoebing Denmark Founded: 1886 Phone: +45 9732 1166 Telefax: +45 9732 1800 E-mail: post@landbobanken.dk Website: www.landbobanken.com CVR-no.: 37 53 68 14 Bank registration number in Denmark: 7670 SWIFT/BIC: RINGDK22 Share capital Ringkjoebing Landbobank's share capital is DKK 25.2 million in 5,040,000 shares of DKK 5. Ownership Ringkjoebing Landbobank is owned by approx. 17,660 shareholders. We report as required by Section 28a of the Danish Companies Act that ATP, Hilleroed, has advised that they own more than 5% of the bank's share capital. A N N U A L R E P O R T 2 0 1 1 PA G E 8 5 Stock exchange announcements 2011 Review of Ringkjoebing Landbobank's announcements to NASDAQ OMX Copenhagen and others in 2011 in compliance with Section 27b of the Danish Securities Trading Act: 04 January 2011 Notifi cation of early redemption of subordinate loan capital 27 Januar 2011 Notice convening the annual general meeting the 23 February 2011 02 February 2011 Announcement of the anual accounts 2010 02 February 2011 Annual report 2010 02 February 2011 Agenda for the annual general meeting 07 February 2011 Exposure to Amagerbanken 24 February 2011 Minutes of the annual generel meeting the 23 February 2011 24 April 2011 Quarterly report 1st quarter 2011 28 April 2011 Newly elected for the board of directors 03 August 2011 Interim report for the 1st half 2011 29 September 2011 Financial calender 26 October 2011 Quarterly report 1st-3rd quarter 2011 15 December 2011 Updated fi nancial calender Announcements regarding insiders' transactions with the Ringkjoebing Landbobank share from executive employees and their closely related do not emerge from the above review. All the announcements from the bank to NASDAQ OMX Copenhagen and others can be seen on the website: www.landbobanken.com. STOCK EXCHANGE ANNOUNCEMENTS F I N A N C I A L C A L E N D A R Financial calendar 2012 The fi nancial calendar for the upcoming publications is as follows: 01 February 2012 Announcement of the annual accounts for 2011 29 February 2012 General meeting 25 April 2012 Quarterly report, 1st quarter 2012 08 August 2012 Interim report 2012 24 October 2012 Quarterly report, 1st-3rd quarters 2012 PA G E 8 6 R I N G K J OE B I N G L A N D B O B A N K A / S T H E B A N K ' S B R A N C H E S E T C .
(MORE TO FOLLOW) Dow Jones Newswires
February 01, 2012 02:33 ET (07:33 GMT)
Head offi ce:
Ringkoebing
Branches:
Herning
Investcenter Herning
Holstebro
Investcenter Holte
Hvide Sande
Lem
Spjald
Tarm
Thorsminde
Tim
Ulfborg
Viborg
Vildbjerg
A N N U A L R E P O R T 2 0 1 1 PA G E 8 7
Bent Naur
Executive general manager
Ole Bjerregaard Pedersen
Financial manager
Joergen Hoejgaard
Foreign manager
Sten Erlandsen
Head of treasury
Joern Nielsen
Credit manager
John Bull Fisker
General manager
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Language: English
Company: Ringkjoebing Landbobank A/S
Dänemark
Phone:
Fax:
E-mail:
Internet:
ISIN: DK0060032068
Category Code: ACS
LSE Ticker: 0FTC
Sequence Number: 977
Time of Receipt: Feb 01, 2012 08:33:05
End of Announcement DGAP News-Service
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(END) Dow Jones Newswires
February 01, 2012 02:33 ET (07:33 GMT)
© 2012 Dow Jones News
