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Alm. Brand Bank

Annual Report

Bank | Forsikring | Pension

Take good care of what ma�ers most

ALM. BRAND BANK ANNUAL REPORT 2015

OVERVIEW

02

BANKING

03

24

28

86

Financial statements

Financial ratios

5-year highlights

Company information

Directorships and special qualifications

Contents

Banking 06 Alm. Brand Bank 14 Human resources 16 Corporate governance 20 Capitalisation 22 Investor information

28 Statement by the Management Board and the Board of Directors 29 Auditor’s report 31 Income and comprehensive income statement 32 Balance sheet 34 Statement of changes in eguity 35 Cash flow statement 36 Segment information 39 Overview of notes 40 Notes

0604


OVERVIEW

03

COMPANY INFORMATION

Deloitte Statsautoriseret Revisions-partnerselskab

Jørgen Hesselbjerg Mikkelsen Chairman

Boris Nørgaard KjeldsenDeputy Chairman

Anette Eberhard

Jan Skytte Pedersen

Ebbe Castella

Søren Boe Mortensen

Christian BundgaardElected by the employees

Torben JensenElected by the employees

Pia StøjferElected by the employees

Company information

Management Board Auditors

Internal auditor

Registration

Address

Board of Directors

Kim Bai WadstrømManaging Director

Joined Alm. Brand in 2011Managing Director of Alm. Brand Bank A/S since 2011

Poul-Erik WintherGroup Chief Auditor

Alm. Brand Bank A/SCompany reg. (CVR) no. 81 75 35 12

Midtermolen 7DK- 2100 Copenhagen ØPhone: 35 47 48 49Telefax: 35 47 47 35

Internet: almbrand.dkMail: [email protected]


OVERVIEW

04

5-YEAR HIGHLIGHTS

5-year highlights

INCOME STATEMENT

BALANCE SHEET

KEY RATIOS

GROUP

DKKm 2015 2014 2013 2012 2011

Forward-looking activities:Net interest and fee income, Private 218 182 179 177 172

Trading income (excl. value adjustments) 181 212

240

172

224

Other income 172 137 89 63 55Total income 571 531 508 412 451 Expenses –352 –344 –368 –364 –368Depreciation and amortisation –121 –91 –52 –33 –18Core earnings 98 96 88 15 65 Value adjustments –59 –31 –33 3 –96Profit/loss from investments – 17 –2 –6 –

Alm. Brand Formue (the bank’s ownership interest) – –4 –25 –2 –28

Profit/loss before impairment writedowns 39 78 28 10 –59

Impairment writedowns –21 –17 –118 –57 –105

Profit/loss before tax, forward-looking activities 18 61 –90 –47 –164

Of which discontinued activities – 17 –6 13 –8

Winding-up activities:Profit/loss before impairment writedowns –43 –76 –123 –49 –101Impairment writedowns –306 –260 –256 –423 –889

Loss before tax, winding-up activities –349 –336 –379

–472 –990

Total loss before tax and minority interests –331 –275 –469 –519 –1,154

Tax 82 116 77 128 236

Loss for the year before minority interests –249 –159 –392 –391 –918

Minority interests – 11 26 39 –32Consolidated loss for the year –249 –148 –366 –352 –950

Loans and advances, forward-looking

activities2,981 2,585 2,568 2,754 3,158

Loans and advances, winding-up activities 1,317 2,069 4,772 5,642 7,059Deposits 8,099 11,076 10,936 11,325 7,995Shareholders’ equity 1,495 1,744 1,696 1,169 1,234 Share attributable to minority interests – – 193 173 141Total assets 10,416 14,411 16,296 17,903 21,393

Average no, of employees (full-time equivalents) 261 258 263 275 286

Interest margin (%) 1.9 1.7 1.6 1.4 1.6Income / cost ratio 0.59 0.56 0.38 0.42 0.08Impairment ratio 3.9 2.1 2.1 2.8 6.0Total capital ratio 17.2 17.8 18.4 18.5 16.8

In the management’s review, the items of the income statement and loans and advances have been broken down by forward-looking activities and winding-up activities. The line items of the income statement are described in Accounting policies.

Alm. Brand Formue was liquidated in 2014. In accordance with IFRS 5, Alm. Brand Formue and the related income statement items are consequently recognised in a separate line item in the income statement and in the notes, whereas in the above highlights and in the forward-looking activities they are included in “Of which discontinued activities”. Reference is made to the section Accounting policies.

Financial ratios are based on the definitions and guidelines of the danish FSA and on “Recommendations & Financial Ratios 2015” issued by the Danish Society of Financial Analysts.


OVERVIEW

05

BANKING

05

Helping customersevery day

571 2,550 18Total income

DKKm DKKm DKKm

Loans and advances, Private Profit before taxForward-looking activities

Banking

50,000 Customers

(50% are also customers of Non-life Insurance or Life and Pension)

Banking, PrivateFinancial Markets LeasingApprox. 25 employees and 6,000 leased carsPartnerships with car importers and car dealers across DenmarkDistribution to commercial customers through in-house consultants

90 banking, investment and pension advisers working from 11 branches

Approx. 45 employees Approx. DKK 33 billion in custody accounts

Commercial customers Private customers


06

OVERVIEWBANKING

BankingThe forward-looking activities reported pre-tax profit of DKK 18 million. The performance was adversely affected by financial market turmoil.

MarketPrivateThe private customer market was the most optimistic in a long time in 2015. How-ever, there is still a general tendency among many private customers of preferring to reduce bank debt and increase savings.

The housing market developed more favourably in 2015 than it has for the past many years. Recovery in both prices and turnover of real estate, which in 2014 was seen mainly in Greater Copenhagen, has now spread to more towns and cities. The improved real estate turnover adds greater robustness to the housing market for the benefit of the many homeowners and consequently also the financial sector.

Housing market developments have a major influence on the financial decisions made by private customers. As a result, Alm. Brand Bank is feeling the positive effects of greater optimism and a greater volume of real estate transactions, which often involve a change of bank. This has resulted in many new customers and growth in the bank’s lending.

The prevailing historically low level of interest rates continues to have a significant influence on customer behaviour as it is very difficult to find deposit products that provide a positive return. Combined with a general increase in private customer in-vestment appetite, this has produced growth in business volume in the investment area. This trend is expected to continue in 2016.

KIM BAI WADSTRØM MANAGING DIRECTOR, BANKING

“The bank is reporting strong and satisfactory business activity, driven, among other things, by a 13% increase in the number of Pluskunder.


OVERVIEW

07

BANKING

However, the positive economic developments for private customers makes competition for the best customers even harder. This puts interest margins on home financing under pressure, especially for these customer groups. The compet-itive landscape is not expected to change in 2016, and this means that more customers are likely to consider changing banks, which could put additional pressure on the interest margin. Supported by Alm. Brand Bank’s customer con-cepts and customer relationships, the added competition is expected to have a positive effect on growth.

Financial Markets2015 was a historically volatile year in the financial markets. The Swiss franc/euro peg ended unexpectedly, leading to general uncertainty about the strength of the Danish kroner/euro peg. As a result, Danmarks Nationalbank was forced to launch a strong defence of the Danish krone, cutting its key lending rate to a historical low at minus 0.75%. At the same time, the issuance of government bonds was suspended, and Danmarks Nationalbank adjusted the banks’ current accounts, which also had a substantial impact on the Danish fixed-income market.

This marked the beginning of an interest rate decline, caus-ing Danish and European interest rates to plummet to the lowest levels ever recorded. The low level of interest rates triggered a remortgaging wave in Denmark, as homeowners were able to obtain 30-year mortgages at 2% interest.

In spring, expectations of monetary retrenchment began to emerge, causing interest rates to surge. As a result of the interest rate increases, the credit spread between mortgage bonds and the swap rate widened, increasing to a very high margin. The yield spread remains widened, as new tighter liquidity regulations for banks, among other sectors, have made Danish mortgage bonds less attractive.

European equities were also seen to be extremely volatile in 2015. The volatile market gave rise to an increase in demand for professional advisory services from the bank’s customers.

LeasingThe market for private car leasing grew significantly, causing several players to increase their activities in that field. Private leasing remains focused on small and mid-sized cars, and the share of privately leased passenger cars as a percentage of total sales rose from 11% in 2014 to 15% in 2015.

The registration fee for new vehicles was lowered from 180% to 150% in 2015. This change in fee is assessed to be one of possibly several upcoming registration fee reductions.

The fee reduction already implemented and any upcoming reductions are expected to have a positive effect on the car leasing market. Mounting uncertainty about used car values is highly likely to incentivize more customers, corporate as well as private, to turn to leasing when they need a new car.

PerformanceThe forward-looking activities generated profit of DKK 18 million, which, while in line with expectations, was not satisfactory. The performance was strongly impacted by the low level of interest rates obtainable on investment of excess liquidity and by capital losses on bonds.

Winding-up activities produced a loss of DKK 349 million, which was within the expected range.

The bank reported a total pre-tax loss of DKK 331 million and impairment writedowns of DKK 327 million (2014: DKK 277 million). DKK 306 million of the impairment writedowns made in 2015 was attributable to winding-up activities, the writedowns mainly being a consequence of the challenging conditions in the Danish agricultural sector.

The interest margin for the banking group improved by 0.2 of a percentage point to 1.9%.

Forward-looking activitiesThe pre-tax results fell by DKK 43 million relative to 2014 to a profit of DKK 18 million. The decline was due to low or negative interest rates on investment of the bank’s excess liquidity, value adjustment losses and to the fact that the 2014 results were lifted by an adjustment for accounting purposes related to the solvent liquidation of Alm. Brand Formue A/S.

Total impairment writedowns amounted to DKK 21 million. Impairment writedowns were at a normal level in 2015, representing 0.6% of the average portfolio.

Core earnings increased by DKK 2 million to DKK 98 million, driven by an increase in net interest and fee income and a higher profit from the bank’s leasing activities. On the other hand, a decline in trading income and higher costs detracted from the core earnings.

IncomeThe bank generated income of DKK 571 million in 2015, an increase of DKK 40 million or 8% relative to 2014. The in-crease was driven by net interest and fee income and other income, primarily comprising the bank’s leasing activities.

CostsCosts amounted to DKK 352 million in 2015, which was 2% higher than in 2014. Staff costs and administrative expens-es amounted to DKK 341 million (2014: DKK 334 million), among other things driven by an increase in headcount in the bank’s branch network. Other operating expenses, pri-marily to the Guarantee Fund for Depositors and Investors, amounted to DKK 11 million (2014: DKK 10 million).


OVERVIEW

08

BANKING

Value adjustmentsValue adjustments produced a loss of DKK 59 million in 2015, against a loss of DKK 31 million in 2014.

Interest-related value adjustments produced a loss of DKK 84 million (2014: DKK 57 million) attributable to the bank’s bond portfolio, which is predominantly composed of Dan-ish mortgage bonds. Volatility in the fixed-income market caused major fluctuations in the credit spread between mortgage bonds and swap rates, which impacted the return. The bank’s bond portfolio thus yielded a negative return of 0.1% in 2015, compared with a positive return of 1.2% in 2014. The return was not satisfactory relative to the bench-mark performance.

The bank achieved a capital gain on equities of DKK 13 mil-lion in 2015, against a gain of DKK 14 million in 2014. Currency-related value adjustments produced a gain of DKK 12 million, which was on a par with 2014, although the bank incurred a capital loss in Q1 2015 related to the volatility surrounding the Swiss franc.

Private

DKKm 2015 2014

Income 218 182

Expenses -209 -204

Core earnings 9 -22

Impairment writedowns -21 -18

Loss before tax -12 -40

Impairment writedownsImpairment writedowns on the bank’s forward-looking activities amounted to DKK 21 million, which was DKK 4 million higher than in 2014. The impairment writedowns were slightly higher than expected, among other things due to a capital reservation made to protect against customers’ potential losses in connection with the expiry of interest-only periods on their mortgage loans.

Business activitiesPrivateThe bank incurred a pre-tax loss of DKK 12 million on its private customer activities. The DKK 28 million improvement was primarily driven by a significant increase in income. Part of the increase was due to the bank’s lending to Alm. Brand Leasing being moved from Treasury to Private in 2015.

The number of Pluskunder, who use Alm. Brand Bank as their main banker, continued the strong trend, increasing by 13% in 2015. Moreover, average earnings from the bank’s Pluskunder increased by 7% relative to 2014.

Driven by an increase in new lending, total loans and ad-vances to private customers increased by DKK 197 million in 2015 to stand at DKK 2.6 billion at 31 December 2015.

Private customer lending (DKKbn)

1.5

1.0

0.5

2.0

2.5

3.0

020142013 2015


OVERVIEW

09

BANKING

Financial Markets

DKKm 2015 2014

Income 160 146

Expenses -97 -93

Core earnings 63 53

Value adjustments -4 -7

Profit before impairment writedowns 59 46

Impairment writedowns 0 1

Profit before tax 59 47

In addition, the portfolio of Totalkredit loans for which the bank acted as intermediary grew significantly, by more than DKK 1.1 billion, to stand at DKK 6.3 billion at 31 December 2015, equivalent to an increase of just over 21%.

The pensions area also developed favourably, as the bank succeeded in growing its total pension assets by just over 1%. Assets in the bank’s portfolio management product – Investment Scheme – grew by more than 13% alone.

Leasing

DKKm 2015 2014

Income 171 136

Expenses -39 -41

Depreciation and amortisation -121 -91

Profit before tax 11 4

Financial MarketsFinancial Markets reported a pre-tax profit of DKK 59 million (2014: DKK 47 million), driven by an increase in income from e.g. asset management activities, which performed strongly in 2015.

Despite financial market volatility and periods of sluggish trading activity, income increased by almost 10% to DKK 160 million.

Costs increased by DKK 4 million to DKK 97 million.

The number of customers in Financial Markets continued to grow in 2015. The number of private customers in Markets increased by 29%, while the number of institutional custom-ers in Asset Management increased by 6%.

At 31 December 2015, Asset Management had assets under management of approximately DKK 31 billion.

LeasingLeasing activities generated pre-tax profit of DKK 11 million, which was a DKK 7 million improvement on 2014.

Leasing activities generated portfolio growth of DKK 146 million in 2015. The favourable portfolio performance was driven by leases to both private and commercial customers. Total leasing activities amounted to DKK 655 million at 31 December 2015, against DKK 509 million at 31 December 2014.

As a result of the portfolio growth, income increased by DKK 35 million to DKK 171 million compared with 2014. Costs were DKK 2 million lower than in 2014.

Depreciation increased by DKK 30 million to DKK 121 million in 2015 due to the larger portfolio.

Totalkredit portfolio (DKKbn)

4.0

7.0

5.0

6.0

3.0

0

2.0

1.0

2013 2014 2015


OVERVIEW

10

BANKING

OtherOther activities, consisting primarily of Treasury, reported a pre-tax loss of DKK 40 million in 2015, compared with a profit of DKK 50 million in 2014.

The decline from 2014 to 2015 was mainly due to a greater loss on value adjustments and a lower level of income. The main reason for the decline in income was the combination of substantial excess liquidity and negative interest rates. Moreover, funding of leasing activities was moved from Treasury to Private. The 2014 performance was moreover lifted by a DKK 17 million adjustment for accounting purpos-es in connection with the solvent liquidation of Alm. Brand Formue.

Winding-up activitiesThe bank’s winding-up activities are composed of agricultur-al, commercial and mortgage deed exposures. Market devel-opments in the individual segments varied greatly in 2015.

The bank’s winding-up activities posted a loss of DKK 349 million (2014: DKK 336 million loss), which was in line with the most recent guidance of a loss of DKK 350 million.

The winding-up activities are subject to substantial impair-ment writedowns, totalling DKK 306 million in 2015 (2014: DKK 260 million). Before impairment writedowns, the wind-ing-up activities reported a loss of DKK 43 million, which was an improvement of DKK 33 million relative to 2014.

Total loans and advances in the winding-up portfolio declined by DKK 750 million to DKK 1.3 billion in 2015, representing one third of the bank’s overall lending portfolio. Adjusted for losses and writedowns, the lending portfolio was reduced by close to DKK 490 million, which was better than expected.

AgricultureThe portfolio consists of 60 agricultural customers, com-posed of about 48% pig farming, about 44% dairy farming and about 8% arable farming. Over the past few years, the bank has made targeted efforts to reduce its credit exposure in this segment, which has had the natural effect of caus-ing the credit quality of the remaining portfolio to gradually deteriorate.

The bank’s agricultural customers generally have a high lev-el of debt, and a number of exposures are characterised by strained liquidity. The current situation of low pork and milk settlement prices, which has prevailed since 2014, contrib-utes to further deteriorating conditions.

The bank’s gross lending to the agricultural segment totalled DKK 1,141 million at 31 December 2015. At 31 December 2015, the carrying amount of these loans and advances was DKK 308 million, and accumulated impairment writedowns hence totalled DKK 833 million.

The portfolio was reduced by DKK 360 million in 2015. Less losses and writedowns, the agricultural lending portfolio declined by DKK 86 million. The reduction was primarily related to the winding up of exposures.

Impairment writedowns amounted to DKK 274 million in 2015, reflecting that 2015 was yet another very difficult year for the agricultural sector. Total collective impairment charges related to the agricultural segment were DKK 140 million at 31 December 2015. The bank expects that the difficult earnings conditions for agriculture will persist in 2016. In spite of this, impairment writedowns are expected to be substantially lower in 2016, as the portfolio had been written down significantly at 31 December 2015. However, a significant change in the valuation of farms could change these expectations.

CommercialThe portfolio consists of lending to finance investment properties, lending to businesses and property development projects.

The total portfolio decreased by DKK 313 million in 2015 to DKK 781 million. Writedowns in the amount of DKK 41 million were reversed in 2015, as the sale of properties in connection with the winding up of exposures generally pro-vided better coverage of the bank’s receivables.

Mortgage deedsThis segment comprises the bank’s own portfolio of pri-vate and commercial mortgage deeds and mortgage deed exposure through an option agreement with Alm. Brand Forsikring.

Other

DKKm 2015 2014

Income 22 67

Expenses -7 -6

Core earnings 15 61

Value adjustments -55 -24

Profit from investments 0 17

Alm. Brand Formue (the bank’s ownership interest) 0 -4

Profit/loss before tax -40 50


OVERVIEW

11

BANKING

Developments in the mortgage deed segment generally reflect developments in the housing market, which in 2015 was characterised by greater real estate turnover and higher prices in the Greater Copenhagen area as well as in major Danish towns and cities. On the other hand, there are also areas in Denmark where listings hardly attract any buyers at all. The number of forced sales was unchanged from 2014 to 2015, while the number of delinquencies on both private and commercial mortgage deeds fell.

The portfolio was reduced by DKK 79 million to DKK 228 million in 2015, while the mortgage deed exposure through the option agreement amounted to DKK 1.6 billion at 31 De-cember 2015, against DKK 1.9 billion at 31 December 2014.

Credit-related writedowns on mortgage deeds amounted to DKK 73 million in 2015, of which DKK 44 million related to the option agreement on mortgage deeds concluded with Alm. Brand Forsikring. The higher credit-related writedowns in the fourth quarter were due to, among other things, a capital reservation made to protect against potential losses on the option agreement made with Alm. Brand Forsikring as a result of the expiry of interest-only periods on custom-ers’ mortgages.

Compared with the banking sector in general, the bank has fairly high exposure to mortgage deeds relative to its overall credit exposure. Losses and writedowns on the mortgage deed portfolio were almost halved from 2014 to 2015.

Balance sheetLoans and advancesThe bank’s loans and advances declined by DKK 0.4 billion to stand at DKK 4.3 billion at 31 December 2015.

Excluding intra-group lending and writedowns, loans and advances increased by DKK 143 million for the forward-look-ing activities and declined by DKK 751 million for the wind-ing-up activities.

DepositsThe bank had deposits of DKK 8.1 billion at 31 December 2015, against DKK 11.1 billion at 31 December 2014. The bank had expected to reduce total deposits further in 2015, but even at 0% interest on deposit accounts this did not materialise to the necessary extent, as the alternative place-ment options available to customers were limited.

However, the bank is still experiencing a positive shift in deposits from high-interest fixed-rate deposits to lower-in-terest floating-rate deposits. Fixed-rate deposits declined from DKK 5.4 billion to DKK 1.7 billion in 2015. Floating-rate deposits, on the other hand, increased by just over 30% to DKK 5.0 billion in 2015.

The bank maintains its strategy of further reducing both fixed-rate deposits and total deposits in 2016.

Lending year-end, winding-up portfolio

Credit exposure after writedown Losses and writedowns Total

DKKm 2014 2015 Share in % Q1 Q2 Q3 Q4 2015 Impairments in %a)

Agriculture 668 308 24 57 60 68 89 274 56

Commercial 1,094 781 59 –12 –4 –6 –19 –41 –4

Mortage deedsb) 307 228 17 6 –4 3 24 29 11

Total loans 2,069 1,317 100 51 52 65 94 262 16

Credit exposure through option agreement on mortgage deedsb) 1,874 1,588 – 12 10 9 13 44 3

Winding-up activities 3,943 2,905 – 63 62 74 107 306 9

a) Losses and writedowns as a percentage of the average portfolio in 2015. The percentage is not comparable with the impairment ratio in the bank’s financial highlights and key ratios.b) The impairment writedowns include credit-related value adjustments of mortgage deeds.


OVERVIEW

12

BANKING

LiquidityAt 31 December 2015, the bank had cash funds of DKK 4.2 billion and excess liquidity of DKK 3.1 billion, equivalent to an excess coverage of 272% relative to the statutory requirement. The excess coverage was reduced by DKK 1.8 billion in 2015.

Management monitors the bank’s liquidity closely, and efforts will be made to further reduce the excess liquidity coverage in 2016.

Denmark implemented the new European Liquidity Coverage Ratio (LCR) with effect from 1 October 2015. At some point in the future, the LCR will replace the existing section 152 key ratio. The LCR expresses whether the bank has a suffi-cient buffer of liquid high-quality assets to meet its liquidity needs in a short-term period of liquidity stress, and the requirement for excess coverage will be increased gradually from 60% to 100% in the period until 1 January 2018. The LCR will affect the management and composition of bank liquidity, including in particular the proportion of extremely liquid assets such as government bonds. At 31 December 2015, the bank’s LCR was 382%.

Capital reservation for credit riskThe banking group’s total capital reservation for credit risk decreased by DKK 311 million in 2015 to stand at DKK 2,928 million at 31 December 2015.

The capital reservation equalled 38% of the credit exposure at 31 December 2015, which was an increase of 1 percent-age point relative to 31 December 2014.

The capital reservation on the forward-looking portfolio accounted for 22% of the credit exposure, and the capital reservation on the winding-up portfolio represented 48% of the credit exposure.

Of the banking group’s total capital reservation at 31 De-cember 2015, accumulated impairment writedowns amount-ed to DKK 1,440 million, compared with DKK 1,458 million at 31 December 2014. Accumulated impairment writedowns broke down as follows at 31 December 2015: DKK 310 mil-lion on the forward-looking portfolio and DKK 1,130 million on the winding-up portfolio. To this should be added a fair value adjustment of mortgage deeds of DKK 711 million.

Capital reservation for credit risk

31.12.2015 31.12.2014

DKKmTotal

assetsCredit

exposurea)

Accumulated impairment

writedownsb)Required

capitalTotal

reservation

Reserva- tion/Credit

exposureTotal

reservation

Reservation/Credit

exposure

Forward-lookingportfolio 2,684 2,994 310 353 663 22% 583 21%

Winding-upportfolio 1,317 4,724 1,841 430 2,271 48% 2,648 45%

Total - excl. reversetransactions 4,001 7,718 2,151 783 2,934 38% 3,231 37%

Reversetransactions including intra-grouptransactions 297 297 – 19 19 6% 8 18%

Total group 4,298 8,015 2,151 802 2,953 37% 3,239 37%

a) Gross lending, residual debt on mortgage deeds and credit exposure through the option agreement with Alm. Brand Forsikring.b) Including value adjustments of mortgage deeds.


OVERVIEW

13

BANKING

Supervisory DiamondAt 31 December 2015, the bank was in compliance with all five threshold values of the Danish FSA’s Supervisory Diamond.

Developments in the bank’s Supervisory Diamond values were in line with expectations.

Major eventsIncrease of the current account limit At the beginning of February 2015, Danmarks Nationalbank lowered its official rate of interest on certificates of deposit to minus 0.75% due to the pressure on the Danish krone. In the period from March to August, Alm. Brand Bank’s current account limit with Danmarks Nationalbank was temporar-ily increased from DKK 250 million to DKK 650 million. As a result of this increase, the bank was able to hold more of its excess liquidity as deposits with Danmarks National-bank at 0% interest during this period. The official rate of interest on certificates of deposit remained at minus 0.75% until year-end and was raised to only minus 0.65% at the beginning of 2016, in spite of the fact that the pressure on the Danish krone has tailed off, and currency reserves have been restored to the level of before the Danish krone came under pressure.

At the beginning of 2016, the current account limit was reduced by a further 50% to DKK 125 million. As a result, the bank now has to place an even bigger share of its cash

funds with Danmarks Nationalbank or in the money market at a negative rate of interest.

New website for private car leasingIn spring 2015, Alm. Brand Leasing launched a new website for private car leasing.

The website provides customers with a better overview of their options, making it easier for them to tailor their own lease.

Wage guarantee As a new feature, Alm. Brand has offered wage guarantee cover for Pluskunder of Alm. Brand Bank and Alm. Brand Forsikring since 1 October 2015. This is a unique product in that it is also available to customers who are not mem-bers of an unemployment fund. Moreover, all customers get improved cover compared to a wage guarantee with an un-employment fund, including coaching by a career consultant with a view to quick reemployment.

Recognition and measurement uncertainty The most significant uncertainties in recognition and meas-urement relate to impairment writedowns on loans, valuation of the loss option agreed with Alm. Brand Forsikring with a view to hedging the credit risk on mort-gage deeds, and deferred tax assets. Manage ment believes that the level of uncertainty in the finan cial reporting for 2015 is acceptable.

See note 46 for a further description of uncertainty in recog-nition and measurement.

Outlook 2016The forward-looking activities are expected to generate pre-tax profit of about DKK 70 million in 2016.

The improvement is expected to be driven by growth in Leasing and activities in Financial Markets. After a turbulent start to 2016 in the financial markets, normal returns are expected for the rest of the year.

The winding-up activities are expected to post a pre-tax loss of DKK 50-75 million. The results before impairment writedowns are expected to improve substantially on 2015 as a result of lower funding costs. Moreover, impairment writedowns on agricultural exposures are expected to decline significantly as a result of the considerable impairment writedowns taken in 2015.

However, developments in the agricultural sector remain subject to significant uncertainty, and a further deterioration of conditions in the agricultural sector could have an adverse effect on the outlook.

The bank’s winding-up portfolio is expected to be reduced by DKK 200 million in 2016.

Large exposuresThreshold value ‹ 125% 2015 28% 2014 31%

Growth in lendingThreshold value ‹ 20% 2015 –9% 2014 –35%

Funding ratio Threshold value ‹ 1 2015 0.52 2014 0.40

Property exposure Threshold value ‹ 25% 2015 14% 2014 19%

Excess liquidity coverageThreshold value › 50% 2015 272% 2014 323%


OVERVIEW

14

HUMAN RESOURCES

Human resources

HR strategy and objectivesAlm. Brand Bank wants its employees to be committed and to seek influence and assume responsibility for the planning and performance of their own job. Moreover, the bank wants resourceful and dynamic managers who are focused on continuous business, employee and personal development. The bank aims to stand out from the competition in the eyes of its customers by helping each individual employee to develop professionally and to focus on providing supreme customer service.

Higher job satisfaction High job satisfaction is key in being able to provide optimal customer service. High job satisfaction is reflected in how much energy the employees invest in the company and the extent to which their motivation translates into efficient, busi-ness-oriented action and is used to provide optimal customer service.

One of the aims of the group’s strategy, CUSTOMERS FIRST, is therefore to con-solidate and expand the solid foundation developed for the job satisfaction of each individual employee.

Over a number of years, a scoring tool has been used, which, based on a wide variety of parameters, expresses job satisfaction as an index figure on a scale of 0 to 100. For the bank, the January 2015 survey showed that job satisfaction had increased by 2 points to 77, which is at the upper end of the category “high job satisfaction”. For the current strategy period, running until end-2016, we have defined a job satisfaction target of 78.

Compared with most other major companies in the financial sector, the bank scores high. The aim is to maintain the high job satisfaction rate among the bank’s employees, while seeking to increase job satisfaction in areas scoring in the bottom quartile of the index.

Job satisfaction is measured twice annually. One of the surveys is more compre-hensive, comprising a number of questions related to management, corporate culture, image, development and commitment. The other survey is a smaller-scale, follow-up survey.

Executing leadershipCompetent management is crucial for employee welfare and job satisfaction and, by extension, the company’s financial results.

The bank’s managers have received training in the customer service part of the bank’s strategy, equipping them to help their employees provide supreme custom-er service.

The group’s management development programme is based on a management competency model with 12 management skills to ensure that all managers work from the same solid management platform, supporting the group’s strategy and the needs of each individual manager for specific management skills. The structure is based on a number of mandatory initiatives as well as a number of more specific elements tailored to the needs of each individual manager. A separate programme has been developed to prepare new managers to take on their management role.


OVERVIEW

15

HUMAN RESOURCES

Corporate values tailored to our customers’ needsFor years, our corporate values have provided a solid platform for the views and conduct applied by our employ-ees internally and externally, and they have come to truly permeate Alm. Brand.

Training of the bank’s employees in the customer service part of the new strategy continued in 2015. This training programme will continue until mid-2016.

Remuneration policyBoard of DirectorsMembers of the Board of Directors receive a fixed annual remuneration reflecting the scope of the board work and the responsibility related to serving on the board. Each board member receives DKK 160,000. The total remuneration to the Board of Directors was DKK 1.3 million in 2015.

In accordance with the company’s remuneration policy, board members are not remunerated by way of incentive plans.

Management BoardThe members of the Management Board of Alm. Brand Bank are remunerated by way of a salary which is intended to be competitive with the remuneration of other, comparable positions in the financial sector. In addition to this sala-ry, the company provides a pension contribution, and the remuneration also includes a company car, paid telephone subscription and other customary salary substitutes. With effect from 1 April 2014, the Management Board has been comprised by the share option scheme which is applica-ble to the Alm. Brand Group’s other executive officers and senior employees and which constitutes a fixed part of the fixed salary. The remuneration of the Management Board is adjusted every two years.

The members of the Management Board received remunera-tion in the amount of DKK 3.4 million in 2015.

Information on the remuneration policy is available at almbrand.dk/corporategovernance.

Other executives and specialistsWith effect from 1 April 2014, some members of the bank’s senior management were comprised by the share option scheme which is applicable to the Alm. Brand Group’s other executive officers and senior employees and which consti-tutes a fixed part of the fixed salary.

In 2014, the company complied with the remuneration policy described in the Annual Report 2014, and in 2015 it complied with the remuneration policy described above.

Ordinary common sense• We identify with the customer • We keep our promises• We manage rules using common sense

Mutual respect• We listen to our customers• We respect our customers’ experiences• We draw on each other’s knowledge

and experience

Holism and proximity• We care for our customers• We take a holistic approach to the cus-

tomer’s situation• We are accessible

Will to succeed• We set ambitious and realistic goals• We develop professionally and personally • We create results together

Our values

The Alm. Brand AcademyThe Alm. Brand Academy is the anchor point of the group’s development of employee and management skills. The range and complexity of financial products has grown significantly in recent years, and the legislative framework is constantly changing. This puts pressure on the group’s employees to continuously develop their skills to be able to provide customers with the best possible service and advice.

Alm. Brand Bank invests considerable resources in in-house training of new and existing employees. The Alm. Brand Academy is intended to consolidate the opportunities for training in the group in order to build a visible platform for the group’s training initiatives and to act as a showcase for the opportunities for development and training available to each individual employee.

http://www.almbrand.dk/abdk/English/InvestorPress/CorporateGovernance-rules/index.htm


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CORPORATE GOVERNANCE

The Board of Directors believes that corporate governance should be based on a holistic approach that considers the relations and interaction with all stakeholders.

In accordance with a request from the Danish Bankers Association of 24 June 2013, the Board of Directors of Alm. Brand Bank has considered the corporate governance recommendations prepared by the Committee on Corporate Govern-ance applying the “comply or explain” principle. The recommendations are publicly available at corporategovernance.dk.

The Board of Directors of Alm. Brand Bank believes that corporate governance should be based on a holistic approach that considers relations and the interac-tion with all stakeholders. Alm. Brand Bank agrees with the basic principles of the corporate governance recommendations. This is reflected in the company’s management approach, which is generally consistent with the recommendations on corporate governance, however, with the exceptions following from the fact that Alm. Brand Bank only has one shareholder. A detailed review of Alm. Brand Bank’s position on each recommendation and a description of the remuneration policy applicable to members of the Management Board and the Board of Directors are provided on the Alm. Brand Group’s website.

The few areas in which Alm. Brand Bank has opted to deviate from the recommen-dations are discussed below. The main elements of the company’s internal control and risk management systems in relation to the financial reporting process, the composition of the company’s governing bodies and its position on corporate social responsibility are also described below.

Explanation of non-compliance with corporate governance recommendations Takeover bidsThe committee recommends that the company set up contingency procedures in the event of takeover bids. The bank has not set up contingency procedures, as it believes that takeover bids are not realistic given the current ownership structure.

Composition and organisation of the Board of DirectorsThe committee recommends that the company’s articles of association stipulate a retirement age for members of the Board of Directors. For a number of years, the rules of procedure of the Board of Directors have stipulated a retirement age of 70 years for individual board members. As a result, it has been deemed unnecessary to also fix a retirement age in the articles of association.

As regards recruitment and election of board members, the committee recom-mends that at least half of the board members elected by the shareholders at the annual general meeting should be independent. Alm. Brand Bank does not comply with this recommendation, as the composition of the Board of Directors reflects the fact that Alm. Brand Bank is a wholly-owned subsidiary of Alm. Brand A/S.

Corporate governance


https://corporategovernance.dk/english


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The committee recommends that the selection and nomina-tion of candidates for the Board of Directors be carried out through a thoroughly transparent process approved by all members of the Board of Directors. However, the compo-sition of the shareholder-elected members of the Board of Directors reflects that the bank is a wholly-owned subsidi-ary, for which reason candidates are selected and nominated by the parent company’s management.

The company does not provide information about the rec-ommended candidates’ background, qualifications and the criteria for recruitment ahead of the annual general meet-ing, as the sole shareholder is thoroughly familiar with the skills etc. of the nominated candidates. Information about the board members’ other executive positions and direc-torships as well as their special qualifications is included in the annual report. As regards new candidates, information on other executive positions and directorships, etc. is also provided in the complete proposals sent out ahead of the annual general meeting.

Board committees The Board of Directors of Alm. Brand Bank has set up an audit committee. The Chairman and the Deputy Chairman of the Board of Directors, who cannot be deemed to be independent, are members of the committee. The majority of the committee members are thus not independent. The Board of Directors has deliberately chosen this structure and finds that it ensures a strong focus on the work of the committee.

It is recommended that the Board of Directors should set up a nomination committee and a remuneration committee. Considering the bank’s ownership, the Board of Directors believes that there is currently no need to set up such com-mittees. The bank’s parent company has set up a remuner-ation committee, which undertakes the tasks described at group level.

Remuneration of the Board of Directors and the Management Board The committee recommends that the remuneration of the Board of Directors for the current financial year is approved at the general meeting. The Board of Directors believes that it is sufficient that the shareholders approve the remuner-ation paid to the Board of Directors in respect of the past financial year when approving the annual report and that the Chairman of the Board of Directors explains the expect-ed remuneration payable to the Board of Directors for the current financial year.

Overall, the Board of Directors believes that Alm. Brand Bank complies with the corporate governance criteria and that these few exceptions do not constitute a disadvantage or are contrary to the interests of the shareholders or other stakeholders.

Corporate governance code of the danish bankers associationThe Danish Bankers Association has recommended that the board of directors of a bank, in addition to considering the above-mentioned recommendations, should also consider a code of conduct prepared by the Danish Bankers Associa-tion and published on 22 November 2013 – the first time in connection with the preparation of the Annual Report 2014. The recommendations are intended to prompt the banks to actively address a number of key corporate governance topics and to create greater openness about the governance frameworks of the individual banks in order to increase con-fidence in the banking sector.

The corporate governance code of the Danish Bankers Association consists of 12 recommendations. The bank has addressed the recommendations in detail in a table available on the Alm. Brand Group’s website. The bank has opted to deviate from two of the recommendations: Recommenda-tion 3 on the use a well-described, structured process when recruiting candidates for the board of directors as the parent company composes the bank’s Board of Directors and Rec-ommendation 6 on continuous skills development of existing members of the board of directors. However, each individual board member has access to completing any further training deemed by that board member to be relevant.

Financial reporting process The primary responsibility for Alm. Brand Bank’s risk man-agement and control organisation in relation to the financial reporting process rests with the Board of Directors and the Management Board, including compliance with applicable legislation and other financial reporting regulations.

Control environmentThe Board of Directors has defined a working plan ensuring that the Board of Directors assesses, at least once a year, the bank’s:

• Organisation• Plans and budgets• Risk of fraud• In-house rules and guidelines

The Board of Directors and the Management Board are responsible for establishing and approving general policies, procedures and controls in key areas in relation to the fi-nancial reporting process. The audit committee supports the Board of Directors in this work.

The group’s internal audit department reports directly to the Board of Directors and in compliance with the audit plan presented by the internal audit department and adopted by the Board of Directors. The internal audit department performs sample audits of business procedures and internal controls in critical audit areas, including the annual report and the financial reporting.



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The Board of Directors and the Management Board have adopted policies, manuals, procedures, etc. in key areas in relation to financial reporting. On an ongoing basis, the Management Board monitors compliance with relevant legis-lation and other financial reporting regulations and provi-sions and reports its findings to the Board of Directors.

Risk assessmentThe working plan of the Board of Directors ensures that the Board of Directors and the Management Board at least once a year perform an overall assessment of risks in relation to the financial reporting process. In this connection, the Board of Directors specifically assesses Alm. Brand Bank’s organi-sation with respect to:

• Risk measurement and risk management • Financial reporting and budget organisation• Internal controls• Rules on powers of procuration • Segregation of functions or compensatory measures • IT organisation and IT security

As part of the risk assessment, the Board of Directors considers the risk of fraud on an annual basis. This work includes:

• A discussion of management’s potential incentive/motive for committing fraudulent financial reporting or other types of fraud

• A discussion of management reporting with a view to preventing/identifying and responding to fraudulent financial reporting

The audit committee supports the Board of Directors in these assessments.

Risk management and the financial reporting processDay-to-day risk management is handled at segment level on the basis of risk limits defined by the Management Board and approved by the Board of Directors.

Risk management is coordinated by a cross-organisational risk committee consisting of the group’s Management Board and the bank’s Management Board as well as the persons in charge of the credit secretariat, the sales organisation, the finance department and the risk management department.

The finance department is responsible for preparing interim and full-year financial reports. The risk management depart-ment is responsible for calculating risks on the bank’s finan-cial assets and liabilities, while the credit secretariat is a key contributor in relation to the bank’s impairment writedowns on loans and advances.

The management’s review is prepared by the Investor Relations department on the basis of input from a number of departments, including the finance department, the risk management department and the individual business areas.

Governing bodiesin compliance with Danish legislation, Alm. Brand Bank and the banking group’s subsidiaries (except from a few sin-gle-purpose property companies) have a two-tier manage-ment system with a board of directors and a management board. A detailed presentation of the members of the Board of Directors and the Management Board of Alm. Brand Bank is provided in “Directorships and special qualifications” be-low. The responsibilities and duties of the Board of Directors and the Management Board are defined, for example, in the rules of procedure for the Board of Directors.

The Board of Directors consists of six shareholder-elected members who are nominated by the bank’s principal share-holder, Alm. Brand A/S. Five of the six shareholder-elected board members are also members of the Board of Directors of Alm. Brand, while the sixth shareholder-elected board member is the Chief Executive Officer of Alm. Brand A/S. In addition, the Board of Directors comprises three board members elected by the employees. The age, seniority, other directorships and special qualifications of the board members are set forth in the list of “Directorships and spe-cial qualifications” at the end of the annual report.

In connection with the nomination of new board members, the Board of Directors, with due consideration being had to the partial duality of membership existing between the board of the company’s principal shareholder, Alm. Brand, and the Board of Directors of Alm. Brand Bank, emphasises representation of the following qualifications on the Board of Directors as a whole: general management experience, experience from the Alm. Brand Group’s customer seg-ments, experience in audit and accounting matters, particu-larly in relation to membership of the audit committee, and insight into financial, legal and economic matters. Moreover, a number of more bank-specific skills have been identified in connection with the Board of Directors’ self-evaluation in accordance with the Danish FSA’s guidelines for financial enterprises.

The Board of Directors assesses its overall qualifications and work procedures once a year. The Chairman of the Board of Directors is responsible for the review. The results of the review will form part of the work of the Board of Directors going forward.

The Board of Directors held 13 meetings in 2015.


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19


Audit committeeThe Board of Directors of Alm. Brand Bank has set up an audit committee. The audit committee consists of three board members:

• Anette Eberhard (Chair)• Jørgen H. Mikkelsen• Boris N. Kjeldsen

The Board of Directors believes that Anette Eberhard com-plies with the requirements for independence and qualifica-tions within accounting and auditing defined in section 31 of the Danish Auditors’ Act and Executive Order no. 1393 of 19 December 2011 on audit committees of enterprises and groups of enterprises under the supervision of the Danish FSA. Anette Eberhard has many years of management expe-rience as CEO of EKF (Denmark’s Export Credit Agency) and as a board member of Finansiel Stabilitet, among others.

The audit committee supports the Board of Directors in its work with and supervision of:

• the financial reporting process, including checking the accuracy of financial information disclosed in full-year and interim reports, and ensuring that accounting poli-cies are relevant and have been consistently applied

• Internal control and risk management, including re-viewing and assessing management’s guidelines at least once a year with a view to identifying, monitoring and managing the most important risks. The committee also assesses and reviews internal control and risk manage-ment systems

• Internal and external audit, including reviewing and discussing the results of the work of the internal and external auditors and the auditors’ observations and con-clusions and verifying the independence of the external auditors, including in particular the provision of addition-al services. The committee supervises management’s follow-up on the recommendations to management reported by the internal and external auditors

The audit committee held four meetings in 2015. The audit committee reports to the Board of Directors on an ongoing basis. Audit committee meetings are attended by the audit committee members as well as by the Group Chief Auditor and the appointed auditors. In addition, the audit commit-tee may convene others to participate in the consideration of specific agenda items, including Chief Executive Officer Søren Boe Mortensen and the Group CFO.

Corporate social responsibilityalm. Brand Bank forms part of the Alm. Brand Group and the corporate social responsibility approach is shared with the parent company Alm. Brand A/S. For further informa-tion on corporate social responsibility, see Alm. Brand A/S’s Annual Report 2015.


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CAPITALISATION

Having adequate and satisfactory capital resources is a fundamental prerequisite for Alm. Brand Bank’s ability to assume risks on behalf of its customers.

Various types of calculated risk are taken in support of the bank’s long-term busi-ness objectives. The bank’s risks are described in detail in notes 45 and 46.

The Board of Directors of Alm. Brand Bank is responsible for identifying and quan-tifying the principal risks which the bank currently faces or may face in future. In terms of solvency, the statutory requirement prescribes that the bank must be sufficiently capitalised to absorb adverse events over the next 12 months without compromising outstanding customer accounts. It is the Board of Directors that approves the method of calculation applied in the calculation of the capital require-ment.

Moreover, a capital target is determined to provide an additional buffer relative to the solvency capital requirement.

The Management Board is responsible for ensuring that instructions from the Board of Directors are actually implemented and for ensuring that the Board of Directors is informed about significant changes in the assumptions underlying the capital requirement or the amount thereof.

The capital and risk management is described in detail in the group’s Risk and Cap-ital Management Report for 2015 available at almbrand.dk/risiko.

Total capitalThe bank’s total capital is comprised primarily of shareholders’ equity and tier 2 capital. At 31 December 2015, the tier 2 capital was composed exclusively of ad-ditional tier 1 capital of DKK 175 million, of which DKK 105 million was recognised in the total capital as at 31 December 2015. The additional tier 1 capital may be repaid in October 2016.

Individual solvency needAlm. Brand Bank applies the Danish FSA’s 8+ method for calculating the adequate total capital. The calculation according to the 8+ method is based on 8% of the to-tal risk exposure amount plus a Pillar 2 margin for risks not assessed to be covered by the Pillar 1 requirement.

In the credit area, the guidelines specify methods for calculating Pillar 2 margins for exposures representing more than 2% of the total capital and for credit risk concentration on industries and individual exposures, respectively. Moreover, there is a requirement that a Pillar 2 margin is calculated according to a non-specified method on weak exposures representing less than 2% of total capital.

Capitalisation

http://www.almbrand.dk/abdk/English/InvestorPress/RiskandCapitalManagement/index.htm


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CAPITALISATION

In addition to the specified margins in the credit area, the bank reserves a Pillar 2 margin on agricultural and corporate exposures, on mortgage deeds as well as on the private customer portfolio.

The calculation of adequate total capital in the market risk area is in line with the Danish FSA’s 8+ method as described in the guidelines. Risks related to properties are calculated in the bank under the credit risk area.

Under additional risks, the bank reserves capital for opera-tional risk and earnings risk. The calculation of operational risk is based on the basic indicator method, which calculates the operational risk as 15% of the average net interest income and non-interest-related net income for the past three years. The earnings risk is calculated according to the 8+ method, which requires that capital is reserved if core earnings divided by lending is less than 1%.

The updated solvency guidelines of the Danish FSA stipulate that if the bank has capital instruments expiring within 12 months, it must make a reservation in the adequate total capital corresponding to the amount recognised in the total capital. As the bank’s additional tier 1 capital belongs to this category, the bank has made a reservation of DKK 105 mil-lion. After October 2016 when this capital can no longer be recognised in the total capital, the requirement to reserve capital in the adequate total capital also lapses.

Capital targetThe capital target of Alm. Brand Bank is calculated on the basis of management’s wish to consistently maintain excess capital adequacy relative to the individual solvency need or relative to the statutory minimum requirement of 8% of the total risk exposure amount if the statutory minimum requirement is higher than the individual solvency need defined. In addition, the capital target has been determined so as to take the Basel III rules into account. The capital target can be met through a combination of several capital components such as shareholders’ equity, additional tier 1 capital and subordinated capital.

CRD IV/CRR entails a requirement for a minimum capital of 8% of the total risk exposure amount, a capital conservation buffer of 2.5% and a countercyclical buffer of up to 2.5% to protect against future cyclical downturns. CRD IV/CRR will be implemented gradually in the period until 2019 when the rules must be fully implemented. Consequently, the statuto-ry minimum requirement may be up to 13% in 2019.

The capital target for Alm. Brand Bank has been fixed at an excess capital adequacy corresponding to a solvency ratio of at least 13, always provided that the target must be at least 3 percentage points higher than the individual solvency need.

Capital overview

DKKm Bank Banking group

Total capital 1,378 1,325

Risk exposure 7,401 7,722

Total capital ratio 18.6 17.2

Tier 1 capital ratio 18.6 17.2

Individual solvency need 14.0 13.7

Excess coverage 4.6 3.5


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INVESTOR INFORMATION

Investor information

ActivitiesAlm. Brand Bank A/S is wholly owned by the listed company Alm. Brand A/S. The nominal value of the company’s share capital is DKK 1,021 million. As a result, the primary investor activities take place within the framework of Alm. Brand. For further information, see the 2015 annual report of Alm. Brand A/S and almbrand.dk.

Shareholdings of the Board of Directors and Management Board in Alm. Brand A/SIn 2015, the Board of Directors’ and the Management Board’s shareholdings in Alm. Brand totalled:

Shareholdings

No. of shares held in Jan 2015 No. of shares held in Dec 2015

Personally Related parties Personally Related parties

Board of DirectorsJørgen H. Mikkelsen 130,369 131,439 138,869 139,939

Ebbe Castella 2,000 0 2,000 0

Boris N. Kjeldsen 8,651 0 8,651 0

Anette Eberhard 0 0 0 0

Jan Skytte Pedersen 12,000 75,000 12,000 0

Søren Boe Mortensen 34,697 1,173 34,697 1,173

Christian Bundgaard 6,767 20 6,767 20

Torben Jensen 5,935 196 5,935 196

Pia Støjfer 2,012 1,000 4,212 1,000

Management BoardKim Bai Wadstrøm

0

0

0

0

The members of the Board of Directors and the Management Board hold no shares in other companies of the Alm. Brand Group.

Listed bondsAlm. Brand Bank has issued additional tier 1 capital with a nominal value of DKK 175 million on NASDAQ Copenhagen.

Annual general meetingThe annual general meeting of Alm. Brand Bank will be held at 9.00 a.m. on 27 April 2016 at Alm. Brand Huset, Midtermolen 7, 2100 Copenhagen Ø, Denmark.

http://www.almbrand.dk/abdk/English/index.htm


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INVESTOR INFORMATION

Financial calendar 2016

2 March 2016 Release of Annual Report 2015

27 April 2016 Annual general meeting

11 May 2016 Release of interim report Q1 2016

25 August 2016 Release of interim report H1 2016

16 November 2016 Release of interim report Q3 2016

Company announcements in 2015

25 February 2015 Annual Report 2014

26 March 2015 Notice of annual general meeting

16 April 2015 Result of annual general meeting 2015

12 May 2015 Interim report Q1 2015

5 August 2015 Financial calendar 2016

20 August 2015 Interim report H1 2015

11 November 2015 Interim report Q3 2015

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OVERVIEWALM. BRAND BANK ANNUAL REPORT 2015

BOARD OF DIRECTORS

Jørgen Hesselbjerg Mikkelsen (Chairman)Farm owner, born 1954and appointed in 2004.

Boris Nørgaard Kjeldsen (Deputy Chairman)Managing Director, born 1959 and appointed in 2009.

Søren Boe Mortensen Chief Executive Officer from 2001,born 1955 and appointed in 1998.

SPECIAL QUALIFICATIONS

General management experience Experience from the Alm. Brand Group’s customer segmentsExperience in audit and accounting matters (particularly in relation to membership of the audit commitee)Insight into financial mattersInsight into economic matters

General management experience Experience from the Alm. Brand Group’s customer segmentsExperience in audit and accounting matters (particularly in relation to membership of the audit commitee)Insight into financial mattersInsight into legal mattersInsight into economic matters

General management experience Experience from the Alm. Brand Group’s customer segmentsExperience in audit and accounting matters Insight into financial mattersInsight into economic mattersInsight into legal matters

DIRECTORSHIPS

DIRECTORSHIPS IN THEALM. BRAND GROUP

ChairmanAlm. Brand A/SAlm. Brand Bank A/SAlm. Brand FondAlm. Brand af 1792 fmba

Deputy ChairmanAlm. Brand A/SAlm. Brand Bank A/SAlm. Brand Fond Alm. Brand af 1792 fmba

ChairmanAlm. Brand Forsikring A/SAlm. Brand Præmieservice A/S Alm. Brand Ejendomsinvest A/SForsikringsselskabet Alm. Brand Liv og Pension A/SPensionskassen under Alm. Brand A/S (appointed by the Management Board)

MemberForsikringsselskabet Alm. Brand Liv og Pension A/SAlm. Brand Forsikring A/S

MemberForsikringsselskabet Alm. Brand Liv og Pension A/SAlm. Brand Forsikring A/S

MemberAlm. Brand Bank A/S

MANAGING DIRECTOR – – Alm. Brand A/SAlm. Brand af 1792 fmba

DIRECTORSHIPS OUTSIDE THE ALM. BRAND GROUP

ChairmanDanish Agro A.m.b.aDanish Agro Byggecenter A/SDanish Agro Shoppen A/SDanish Agro Finance A/S

ChairmanDATEA A/SKemp & Lauritzen A/S

Chairman Forsikringsakademiet A/SForsikring & Pension

MemberDanPiglet A/SHesselbjerg Agro A/SVilomix International Holding A/SDava International Holding A/SDan Agro Holding A/SLandbrug & Fødevarer f.m.b.a.Dava Machinery Holding A/S

MemberBenny Johansen & Sønner A/SDAVISTA Komplementar-selskab A/SDAVISTA K/SEjendomsforeningen Danmark (deputy chairman)Arkitektgruppen A/S

–

MANAGER J.H.M. Holding 2010 ApS DADES A/S (Managing Director)DAVISTA Komplementar-selskab A/SDAVISTA K/S

–

Board of Directors

ALM. BRAND ÅRSRAPPORT 2015

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25

BOARD OF DIRECTORSALM. BRAND BANK ANNUAL REPORT 2015

Jan SkyttePedersenManager, born 1956 and appointed in 1998.

AnetteEberhard Manager, born 1961 and appointed in 2015.

Ebbe CastellaManager, born 1950and appointed in 2013.


General management experience Experience from the Alm. Brand Group’s customer segmentsInsight into financial mattersInsight into economic matters

General management experience Experience in audit and accounting matters (particularly in relation to membership of the audit commitee)Insight into financial mattersInsight into economic matters

Experience from the Alm. Brand Group’s customer segmentsInsight into financial mattersInsight into economic matters

DIRECTORSHIPS


– – –

MemberAlm. Brand A/SAlm. Brand Bank A/SForsikringsselskabet Alm. Brand Liv og Pension A/SAlm. Brand Forsikring A/S Alm. Brand af 1792 fmba Alm. Brand Fond

Member Alm. Brand A/SAlm. Brand Bank A/SForsikringsselskabet Alm. Brand Liv og Pension A/SAlm. Brand Forsikring A/S

MemberAlm. Brand A/SAlm. Brand Bank A/S


ChairmanRingvejens Autolakereri A/S Herm. Rasmussen A/SHerm. Rasmussen A/S MalerforretningHerm. Rasmussen A/SErhvervsejendomme

– –

MemberHerm. Rasmussen A/S HoldingK/S PapirfabrikkenMalerfirmaet Fr. Nielsen og Søn, Skanderborg, AktieselskabSilkeborg IF Invest A/SDen Selvejende Institution Silkeborg Fodbold CollegeMichael Sørensens StiftelseEnergimidt Holding A.M.B.A. (Deputy Chairman)

Member Finansiel StabilitetSundhedsfagliges Ejendoms-aktieselskabPensionkassen for sundhedsfaglige

–

MANAGER Herm. Rasmussen A/S HoldingMalerfirmaet Fr. Nielsen og Søn, Skanderborg, Aktieselskab

EKF Danmarks EksportkreditEksport Kredit Finansiering A/S

–

OVERVIEW


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BOARD OF DIRECTORSALM. BRAND BANK ANNUAL REPORT 2015

Christian BundgaardSenior business developer , born 1976 and appointed in 2010.

TorbenJensen Branch manager, born 1966 and appointed in 2013.

PiaStøjferFinancial advisor, born 1961and appointed in 2013.




Experience from the Alm. Brand Group’s customer segmentsInsight into financial matters

DIRECTORSHIPS


– – –


Member Alm. Brand Bank A/S



– – –

– – –

MANAGER – – –

OVERVIEW


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MANAGEMENT BOARDALM. BRAND BANK ANNUAL REPORT 2015

Kim Bai WadstrømManaging Director, born 1964 Joined Alm. Brand in 2011Managing Director of Alm. Brand Bank A/S since 2011

DIRECTORSHIPS


ChairmanAlm. Brand Leasing A/S

Managing Director Alm. Brand Bank A/S

Management Board

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STATEMENT BY THE MANAGEMENT BOARD AND THE BOARD OF DIRECTORS

Copenhagen, 2 March 2016

Kim Bai Wadstrøm Managing Director


Jørgen Hesselbjerg Mikkelsen Boris Nørgaard KjeldsenChairman Deputy Chairman

Anette Eberhard Jan Skytte Pedersen

Ebbe Castella Søren Boe Mortensen

Christian Bundgaard Torben Jensen

Pia Støjfer

Statement by the Management Board and the Board of DirectorsThe Board of Directors and the Management Board have today considered and approved the annual report of Alm. Brand Bank A/S for the financial year 1 January to 31 December 2015.

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU and Danish disclosure re-quirements for listed financial companies. The parent bank financial statements have been prepared in accordance with the Danish Financial Business Act. The management commentary has been prepared in accordance with the Danish Financial Business Act.

In our opinion, the consolidated financial statements and the parent bank financial statements give a true and fair view of the Group’s and the Parent Bank’s financial posi-tion at 31 December 2015 as well as of the results of their operations and the Group’s cash flows for the financial year 1 January to 31 December 2015.

In our opinion, the management commentary contains a fair review of the development in the Group’s and the Par-ent Bank’s activities and financial position together with a description of the principal risks and uncertainties that may affect the Group and the Parent Bank.

We recommend the annual report for adoption at the Annual General Meeting.

Board of DirectorsManagement Board


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AUDITOR’S REPORT

Auditor’s reportInternal auditor’s report Report on the financial statements We have audited the consolidated financial statements and the parent company financial statements of Alm. Brand Bank A/S for the financial year ended 31 December 2015, comprising an income statement, statement of comprehen-sive income, balance sheet, statement of changes in equity, segment information and notes to the financial statements, including accounting policies, for the group as well as for the parent company, and a consolidated cash flow state-ment. The con-solidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial enterprises. The parent company financial statements have been prepared in accordance with the Danish Financial Business Act.

Management is responsible for the consolidated financial statements and the parent company financial statements. Our responsibility is to express an opinion on the consoli-dated financial statements and the parent company finan-cial statements.

Basis of opinion We conducted our audit on the basis of the Executive Order of the Danish Financial Supervisory Authority on auditing financial enterprises and financial groups and in accordance with international auditing standards. This requires that we plan and perform our audit to obtain reasonable assurance as to whether the consolidated financial statements and the parent company financial statements are free from material misstatement.

We participated in auditing the critical audit areas.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the con-solidated financial statements and the parent company financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assess-ments, the auditor considers internal control relevant to the preparation of consolidated financial statements and parent company financial statements that give a true and fair view. The purpose of this is to design procedures that are appropriate in the circumstances but not to express an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriate-ness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidat-ed financial statements and the parent company financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit did not result in any qualification.

Opinion In our opinion, the consolidated financial statements give a true and fair view of the group’s assets, liabilities and financial position at 31 December 2015 and of the results of the group’s operations and cash flows for the financial year 1 January to 31 December 2015 in accordance with the International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial enterprises.

Furthermore, in our opinion the parent company financial statements give a true and fair view of the parent compa-ny’s assets, liabilities and financial position at 31 December 2015 and of the results of the parent company’s operations for the financial year 1 January to 31 December 2015 in accordance with the Danish Financial Business Act.

Statement on the management’s review We have read the management’s review as required by the Danish Financial Business Act. We performed no other work in addition to the conducted audit of the consolidat-ed financial statements and the parent company financial statements.

On this basis, we believe that the information in the man-agement’s review is in accordance with the consolidated financial statements and the parent company financial statements.


Poul-Erik Winther Group Chief Auditor

Internal auditor

30


AUDITOR’S REPORT

Independent auditors’ reportTo the shareholders of Alm. Brand Bank A/SReport on the consolidated financial statements and parent bank financial statementsWe have audited the consolidated financial statements and Parent Bank financial statements of Alm. Brand Bank A/S for the financial year 1 January to 31 December 2014, which comprise the income and comprehensive income statement, balance sheet, statement of changes in equity, segment information and notes, including the accounting policies, for the Group and the Parent Bank and the cash flow statement of the Group. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial compa-nies. The Parent Bank financial statements are prepared in accordance with the Danish Financial Business Act.

Management’s responsibility for the consolidated financial statements and parent bank financial state-mentsManagement is responsible for the preparation of con-solidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial companies, and for the preparation of parent bank financial statements that give a true and fair view in accordance with the Danish Financial Business Act, and for such internal control as Manage-ment determines is necessary to enable the preparation of consolidated financial statements and Parent Bank finan-cial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on the con-solidated financial statements and parent bank financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and parent bank financial statements are free from material misstatement.

An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and parent bank financial statements. The audit procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements of the consolidated financial statements and parent bank financial statements, whether due to fraud or error. In making such risk assessment, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and parent bank financial statements that give a true and fair view in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of express-ing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriate-ness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as the overall presentation of the consolidated financial state-ments and parent bank financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2014 and of the results of its operations and cash flows for the financial year 1 January to 31 December 2014 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial companies.

In our opinion, the Parent Bank financial statements give a true and fair view of the Parent Bank’s financial position at 31 December 2014 and of the results of its operations for the financial year 1 January to 31 December 2014 in accordance with the Danish Financial Business Act.

Statement on the management commentaryPursuant to the Danish Financial Statements Act, we have read the management commentary. We have not per-formed any further procedures in addition to the audit of the consolidated financial statements and parent bank financial statements.

On this basis, it is our opinion that the information provid-ed in the management commentary is consistent with the consolidated financial statements and parent bank financial statements.


Henrik Wellejus Kasper Bruhn Udam State-Authorised State-Authorised Public Accountant Public Accountant

DeloitteStatsautoriseret RevisionspartnerselskabCompany reg. (CVR) no. 33 96 35 56

Income and comprehensive income statementParent company Group

DKK '000 Note 2015 2014 2015 2014

Interest receivable 1 306,596 452,386 293,773 450,453

Interest payable 2 95,087 217,520 95,107 216,063

Net interest income 211,509 234,866 198,666 234,390

Dividend on shares, etc. 2,370 1,117 2,370 1,117

Fees and commissions receivable 3 206,028 168,758 213,380 174,224

Fees and commissions payable 26,618 25,601 26,803 23,579

Net interest and fee income 393,289 379,140 387,613 386,152

Value adjustments 4 -104,608 -165,133 -104,608 -162,333

Other operating income 7,226 6,003 188,930 143,865

Profit before expenses 295,907 220,010 471,935 367,684

Staff costs and administrative expenses 5 361,829 355,962 397,357 395,720

Depreciation, amortisation and impairment of property,

plant and equipment - 36 121,420 91,342

Other operating expenses 28,693 35,142 31,502 36,168

Impairment of loans, advances and receivables, etc. 6 253,613 141,432 253,211 140,742

Profit/loss from investments in associates and group enterprises 7 17,436 24,265 941 4,017

Profit/loss before tax, continuing activities -330,792 -288,297 -330,614 -292,271

Tax on continuing activities 8 -81,939 -112,208 -81,761 -116,182

Profit/loss on continuing activities -248,853 -176,089 -248,853 -176,089

Profit/loss on discontinued activities 9 - 16,917 - 28,028

Profit/loss for the year -248,853 -159,172 -248,853 -148,061

Other comprehensive income - - - -

Total comprehensive income - - - -

Total comprehensive income for the year -248,853 -159,172 -248,853 -148,061

PROFIT/LOSS ALLOCATION AND COMPREHENSIVE INCOME

Share attributable to Alm. Brand Bank -248,853 -159,172 -248,853 -159,172

Share attributable to minority interests - - - 11,111

Transferred to Total shareholders' equity -248,853 -159,172 -248,853 -148,061

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OVERVIEWINCOME AND COMPREHENSIVE INCOME STATEMENT

31


Balance sheetParent company Group

DKK '000 Note 2015 2014 2015 2014

ASSETS

Cash in hand and balances at call with central banks 262,281 198,496 262,281 198,496

Balances due from credit institutions and central banks 10 301,235 756,639 301,235 756,639

Loans, advances and other receivables at fair value 11 227,516 306,640 227,516 306,640

Loans, advances and other receivables at amortised cost 12 4,725,340 4,938,918 4,071,077 4,347,422

Bonds at fair value 13 3,954,390 7,200,622 3,954,390 7,200,622

Shares, etc. 14 214,422 236,294 214,422 236,294

Investments in associates 15 12,423 44,224 12,423 44,224

Investments in group enterprises 16 151,436 85,941 - 1,000

Investment properties 17 10,818 22,581 145,118 160,081

Other property, plant and equipment 18 - - 655,233 508,946

Current tax assets 19 119,067 98,508 156,271 150,069

Deferred tax assets 20 201,598 214,419 249,508 299,712

Assets held temporarily 21 - 20,874 - 30,165

Other assets 22 136,066 160,444 159,677 163,103

Prepayments 6,665 7,232 6,666 7,232

Total assets 10,323,257 14,291,832 10,415,817 14,410,645

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BALANCE SHEET

32


OVERVIEW

Balance sheetParent company Group

DKK '000 Note 2015 2014 2015 2014

LIABILITIES AND EQUITY

Payables

Payables to credit institutions and central banks 23 268,507 1,106,677 359,367 1,199,258

Deposits and other payables 24 8,132,356 11,076,443 8,098,677 11,076,443

Liabilities temporarily acquired - 624 - 624

Other liabilities 25 242,953 176,571 278,332 202,803

Prepayments 6 1 6 1

Total payables 8,643,822 12,360,316 8,736,382 12,479,129

Provisions

Provisions for pensions and similar liabilities 26 1,850 1,760 1,850 1,760

Provisions for losses on guarantees 27 7,698 11,016 7,698 11,016

Total provisions 9,548 12,776 9,548 12,776

Subordinated debt

Additional tier 1 capital 28 175,000 175,000 175,000 175,000

Total subordinated debt 175,000 175,000 175,000 175,000

Shareholders' equity

Share capital 29 1,021,000 1,021,000 1,021,000 1,021,000

Other reserves 98,436 81,941 - -

Retained earnings 375,451 640,799 473,887 722,740

Total shareholders' equity 1,494,887 1,743,740 1,494,887 1,743,740

Total liabilities and equity 10,323,257 14,291,832 10,415,817 14,410,645

See note 31 for a specification of off-balance sheet items.

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BALANCE SHEET

33


OVERVIEW

Statement of changes in equityParent company Group

Share

capital

Other

reserves

Retained

earnings Total

Minority

interests Total

Shareholders' equity at 1 January 2014 1,021,000 61,641 420,271 1,502,912 193,034 1,695,946

Changes in equity in 2014

Profit/loss for the year 16,520 -175,692 -159,172 11,111 -148,061

Comprehensive income in 2014 - 16,520 -175,692 -159,172 11,111 -148,061

Capital injection from Alm. Brand A/S 400,000 400,000 400,000

Other capital movements 3,780 -3,780 - -204,145 -204,145

Total changes in equity in 2014 - 20,300 220,528 240,828 -193,034 47,794

Shareholders' equity at 31 December 2014 1,021,000 81,941 640,799 1,743,740 - 1,743,740

Shareholders' equity at 1 January 2015 1,021,000 81,941 640,799 1,743,740 - 1,743,740

Changes in equity in 2015

Profit/loss for the year 16,495 -265,348 -248,853 - -248,853

Comprehensive income in 2015 - 16,495 -265,348 -248,853 - -248,853

Other capital movements - - - - -

Total changes in equity in 2015 - 16,495 -265,348 -248,853 - -248,853

Shareholders' equity at 31 December 2015 1,021,000 98,436 375,451 1,494,887 - 1,494,887

Non-controlling interests were nil at 31 December 2015 because Alm. Brand Formue A/S was liquidated in 2014.

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STATEMENT OF CHANGES IN EQUITY

34


OVERVIEW

Cash flow statementGroup

DKK '000 2015 2014

Operating activities

Profit/loss for the year before tax -330,614 -264,243

Tax paid for the year 125,761 168,280

Adjustment for amounts with no cash flow impact:

Depreciation, amortisation and impairment of property,

plant and equipment 121,420 91,342

Impairment of loans, advances and receivables, etc. 273,600 128,116

Other adjustments to cash flows from operating activities -39,926 -75,500

Total, operating activities 150,241 47,995

Working capital

Loans and advances 83,364 2,605,119

Deposits -2,977,766 140,000

Bonds 3,353,188 -1,731,589

Shares 38,897 383,426

Total, working capital 497,683 1,396,956

Investing activities

Investments in associates 30,872 -

Investments in group enterprises 1,000 -1,000

Intangible assets 34,572 -

Property, plant and equipment -267,705 -299,750

Total, investing activities -201,261 -300,750

Financing activities

Net proceeds from capital increase - 400,000

Repayment of additional tier 1 capital, Bank Package II - -525,949

Payables to credit institutions -838,282 -997,238

Total, financing activities -838,282 -1,123,187

Change in cash and cash equivalents -391,619 21,014

Cash and cash equivalents, beginning of year 955,135 934,121

Change in cash and cash equivalents -391,619 21,014

Cash and cash equivalents, year-end 563,516 955,135

Cash and cash equivalents, year-end

Cash in hand and balances at call with central banks 262,281 198,496

Balances due from credit institutions less than 3 months 301,235 756,639

Cash and cash equivalents, year-end 563,516 955,135

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CASH FLOW STATEMENT

35


OVERVIEW

Segment informationGroup

DKK '000 2015

Private Leasing

Financial

Markets Other

Total

continuing

activities

before

winding up

Winding-

up

activities

Continuing

activities

Dis-

continued

activities Total

Net interest and

fee income 217,529 - - - 217,529 -5,495 212,034 - 212,034

Trading income, (excl.

value adjustments - - 159,239 22,017 181,256 - 181,256 - 181,256

Other income 2 170,814 1,008 44 171,868 6,173 178,041 - 178,041

Total income 217,531 170,814 160,247 22,061 570,653 678 571,331 - 571,331

Expenses 209,278 38,336 97,063 6,924 351,601 77,259 428,860 - 428,860

Depreciation - 121,420 - - 121,420 - 121,420 - 121,420

Core earnings 8,253 11,058 63,184 15,137 97,632 -76,581 21,051 - 21,051

Value adjustments 654 - -4,200 -55,341 -58,887 28,198 -30,689 - -30,689

Profit/loss from

investments - - -2 - -2 6,157 6,155 - 6,155

Profit/loss before

impairment writedowns 8,907 11,058 58,982 -40,204 38,743 -42,226 -3,483 - -3,483

Writedowns and credit-

related value

adjustments 21,484 -402 -328 20 20,774 306,357 327,131 - 327,131

Profit/loss before tax -12,577 11,460 59,310 -40,224 17,969 -348,583 -330,614 - -330,614

Tax -81,761

Profit/loss for the year -248,853

Of which share

attributable to

minority interests -

Loans and advances 2,549,836 28,480 105,933 296,939 2,981,188 1,317,405 4,298,593 - 4,298,593

Bonds - - 1,889,707 2,064,683 3,954,390 - 3,954,390 - 3,954,390

Lease assets - 655,233 - - 655,233 - 655,233 - 655,233

Other assets 5,002 142,448 42,942 1,199,044 1,389,436 118,165 1,507,601 - 1,507,601

Total assets 2,554,838 826,161 2,038,582 3,560,666 8,980,247 1,435,570 10,415,817 - 10,415,817

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SEGMENT INFORMATION

36


OVERVIEW

Segment informationGroup

DKK '000 2014

Private Leasing

Financial

Markets Other

Total

continuing

activities

before

winding up

Winding-

up

activities

Continuing

activities

Dis-

continued

activities Total

Net interest and

fee income 182,038 - - - 182,038 -11,248 170,790 - 170,790

Trading income, (excl.

value adjustments - - 143,337 64,981 208,318 - 208,318 3,593 211,911

Other income 76 136,287 966 - 137,329 4,941 142,270 - 142,270

Total income 182,114 136,287 144,303 64,981 527,685 -6,307 521,378 3,593 524,971

Expenses 204,268 40,784 93,350 5,612 344,014 87,874 431,888 - 431,888

Depreciation 36 91,306 - - 91,342 - 91,342 - 91,342

Core earnings -22,190 4,197 50,953 59,369 92,329 -94,181 -1,852 3,593 1,741

Value adjustments 554 - -8,094 -23,764 -31,304 2,841 -28,463 2,747 -25,716

Profit/loss from

investments - - 516 -452 64 15,392 15,456 21,687 37,143

Profit/loss before

impairment writedowns -21,636 4,197 43,375 35,153 61,089 -75,948 -14,859 28,027 13,168

Writedowns and credit-

related value -

adjustments 18,525 -690 -645 - 17,190 260,221 277,411 - 277,411

Profit/loss before tax -40,161 4,887 44,020 35,153 43,899 -336,169 -292,270 28,027 -264,243

Tax -116,182

Profit/loss for the year -148,061

Of which share

attributable to

minority interests 11,111

Loans and advances 2,400,604 48,240 92,072 44,832 2,585,748 2,068,314 4,654,062 - 4,654,062

Bonds - - 3,996,774 3,203,848 7,200,622 - 7,200,622 - 7,200,622

Lease assets - 508,946 - - 508,946 - 508,946 - 508,946

Other assets 4,742 148,836 80,669 1,640,433 1,874,680 172,335 2,047,015 - 2,047,015

Total assets 2,405,346 706,022 4,169,515 4,889,113 12,169,996 2,240,649 14,410,645 - 14,410,645

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SEGMENT INFORMATION

37


OVERVIEW

Segment information

GeneralThe segment financial statements show the financial state-ments broken down by the group’s primary business areas. All activities are located in Denmark. Assets are placed in the business areas to which they are related in terms of operations. All funding is channelled to the bank’s treasury function, which is included in the segment Other. Treasury is responsible for the bank’s funding and liquidity. Transac-tions between the segments are settled on market terms. The segment financial statements are in accordance with the bank’s internal reporting. The segment financial statements do not comprise a distribution of revenue by products and services.

Criteria for recognition and measurement are in accordance with the group’s accounting policies. The line items used are consistent with the financial highlights presented at the beginning of the annual report.

Business areas The segment financial statements are segmented accord-ing to the group’s business areas and have generally been divided into continuing activities and winding-up activities. Continuing activities comprise areas in which the bank wish-es to expand its business volume. Winding-up activities and discontinued activities comprise exposures which the bank wishes to reduce in a responsible and financially appropriate manner. The individual business areas are described below.

Private: Provides advisory services and sells financial prod-ucts to the bank’s private customers, both through branch offices in 11 major Danish towns and cities and online. Drawing on the full range of the group’s capabilities, Private offers optimum solutions, including in connection with wealth management and investment. Private procures most of the deposits for the bank’s funding, which is channelled to the bank’s treasury function. The funding of Alm. Brand Leasing was transferred from the business area Other to Private effective from 1 January 2015.

Leasing: Offers operating leases of passenger and commer-cial vehicles with related car fleet management for business-es. The segment also offers operating leases of passenger cars to private individuals. The business area is anchored in Alm. Brand Leasing, which is a subsidiary of the bank.

Financial Markets: Comprises Markets and Asset Manage-ment. The Markets department handles all of the bank’s fi-nancial market activities, providing advisory services on and performing transactions in securities and currency. In addi-tion, Markets prepares research reports on developments in fixed income, equity and foreign exchange markets. Asset Management has assets under management for both institu-tional and private investors.

Other: Comprises the bank’s treasury function, which is re-sponsible for the bank’s composition of funding and liquidity management, including the bank’s own portfolio. All funding procured by the bank’s other business areas is channelled to Treasury, which is responsible for allocation and settlement to the individual business areas. Funding is allocated at a price equivalent to the actual cost of procuring the funding plus a spread to cover administrative expenses and any risks. The funding of Alm. Brand Leasing was transferred to the business area Private effective from 1 January 2015.

Winding-up: Comprises exposures to small and medi-um-sized commercial customers, agricultural customers, property development projects, mortgage deeds and a portfolio of car finance contracts. Efforts are made to gradu-ally reduce these exposures, a process which is expected to extend over a number of years.

Discontinued activities: Comprises the former listed company Alm. Brand Formue A/S, which was liquidated in September 2014. See note 9 for additional information.

SEGMENT INFORMATION

38


OVERVIEW

Overview of notesNOTES WITH REFERENCE

NOTE 1 Interest receivable

NOTE 2 Interest payable

NOTE 3 Fees and commissions receivable

NOTE 4 Value adjustments

NOTE 5 Staff costs and administrative expenses

NOTE 6 Impairment of loans, advances and receivables, etc.

NOTE 7 Profit/loss from investments in associates and group enterprises

NOTE 8 Tax

NOTE 9 Discontinued activities

NOTE 10 Balances due from credit institutions and central banks

NOTE 11 Loans, advances and other receivables at fair value

NOTE 12 Loans, advances and other receivables at amortised cost

NOTE 13 Bonds at fair value

NOTE 14 Shares, etc.

NOTE 15 Investments in associates

NOTE 16 Investments in group enterprises

NOTE 17 Investment properties

NOTE 18 Other property, plant and equipment

NOTE 19 Current tax assets

NOTE 20 Deferred tax assets

NOTE 21 Assets held temporarily

NOTE 22 Other assets

NOTE 23 Payables to credit institutions and central banks

NOTE 24 Deposits and other payables

NOTE 25 Other liabilities

NOTE 26 Provisions for pensions and similar liabilities

NOTE 27 Provisions for losses on guarantees

NOTE 28 Subordinated debt

NOTE 29 Share capital

NOTES WITHOUT REFERENCE

NOTE 30 Total capital

NOTE 31 Off-balance sheet items

NOTE 32 By term to maturity

NOTE 33 Credit risk

NOTE 34 Market risk

NOTE 35 Genuine purchase and resale transactions

NOTE 36 Genuine sale and repurchase transactions

NOTE 37 Related parties

NOTE 38 Derivatives

NOTE 39 Financial highlights and key ratios

NOTE 40 Fair value measurement of financial instruments

NOTE 41 Offsetting

NOTE 42 Return on financial assets and liabilities

NOTE 43 Fair value of financial instruments

NOTE 44 Group overview

NOTE 45 Capital and risk management

NOTE 46 Significant accounting estimates, assumptions and uncertainties

NOTE 47 Accounting policies

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OVERVIEW OF NOTESALM. BRAND BANK ANNUAL REPORT 2015

OVERVIEW

Notes to the financial statementsParent company Group

DKK '000 2015 2014 2015 2014

NOTE 1 Interest receivable

Balances due from credit institutions and central banks -1,547 776 -1,547 773

Loans, advances and other receivables 242,097 380,694 229,274 378,764

Bonds 83,021 101,850 83,021 101,850

Total derivatives -16,960 -31,221 -16,960 -31,221

Of which:

Interest rate contracts -16,960 -31,221 -16,960 -31,221

Other interest income -15 287 -15 287

Total interest receivable 306,596 452,386 293,773 450,453

Interest receivable from genuine purchase and resale transactions:

Loans, advances and other receivables -1,142 -153 -1,142 -153

Loans, advances and other receivables -249 -2 -249 -2

NOTE 2 Interest payable

Credit institutions and central banks 1,248 2,723 1,248 1,153

Deposits and other payables 83,464 195,118 83,464 195,115


Other interest expenses 129 605 149 721

Total interest payable 95,087 217,520 95,107 216,063

Interest payable on genuine sale and repurchase transactions:

Payables to credit institutions and central banks 150 147 150 147

Deposits and other payables -92 3 -92 3

NOTE 3 Fees and commissions receivable

Securities trading and deposits 155,427 126,905 155,427 124,878

Payment transfers 3,624 3,991 3,624 3,991

Loan fees 209 417 209 417

Commission fees 2,373 2,567 2,373 2,567

Other fees and commissions 44,395 34,878 51,747 42,371

Total fees and commissions receivable 206,028 168,758 213,380 174,224

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NOTES

40


OVERVIEW

Parent company Group

DKK '000 2015 2014 2015 2014

NOTE 4 Value adjustments

Loans, advances and other receivables at fair value -28,504 -60,948 -28,504 -60,948

Bonds -98,532 -39,769 -98,532 -39,769

Shares, etc. 8,228 20,573 8,228 20,573

Investment properties -1,266 -8,906 -1,266 -6,106

Foreign currency 10,402 9,837 10,402 9,837

Total derivatives 5,154 -85,572 5,154 -85,572

Of which:

Interest rate contracts 15,741 -85,259 15,741 -85,259

Share contracts -403 -897 -403 -897

Other contracts -10,184 584 -10,184 584

Other liabilities -90 -348 -90 -348

Total value adjustments -104,608 -165,133 -104,608 -162,333

Of the value adjustments above, changes in fair value based on valuation models concern:

Other loans, advances and receivables at fair value 817 74,291 817 74,291

Shares (unlisted shares) 1,528 15,480 1,528 15,480

Investment properties -1,266 -8,906 -1,266 -6,106

Total 1,079 80,865 1,079 83,665

NOTE 5 Staff costs and administrative expenses

Remuneration to the Management Board and Board of Directors:

Remuneration to the Management Board:

Salaries and wages 2,720 2,773 2,720 2,773

Share-based payment 344 229 344 229

Pensions 298 306 298 306

Total remuneration to the Management Board 3,362 3,308 3,362 3,308

Remuneration to the Board of Directors:

Jørgen Hesselbjerg Mikkelsen (Chairman) 160 160 160 160

Boris Nørgaard Kjeldsen (Deputy Chairman) 160 160 160 160

Jan Skytte Pedersen 160 160 160 160

Arne Nielsen 52 160 52 160

Ebba Castella 160 160 160 160

Anette Eberhard 108 - 108 -

Christian Bundgaard (elected by the employees) 160 160 160 160

Torben Jensen (elected by the employees) 160 160 160 160

Pia Støjfer (elected by the employees) 160 160 160 160

Total remuneration to the Board of Directors 1,280 1,280 1,280 1,280

Total remuneration to the Management Board and Board of Directors 4,642 4,588 4,642 4,588

The bank’s counterparties are primarily financial institutions with a high credit rating with which the bank exchanges collateral security on a

daily basis. Accordingly, the bank finds that a credit adjustment does not give rise to a notably different valuation.


41


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 5 Staff costs and administrative expenses continued

Staff costs:

Salaries and wages 155,047 155,733 155,047 155,733

Share-based payment 2,679 499 2,679 499

Pensions 18,145 17,488 18,145 17,488

Social security costs 19,402 17,690 19,402 17,690

Total staff costs 195,273 191,410 195,273 191,410

Other administrative expenses 161,914 159,964 197,442 199,722

Total staff costs and administrative expenses 361,829 355,962 397,357 395,720

Number of employees

Average number of employees during the

financial year, full-time equivalents 261 258 261 258

Management Board

Remuneration of the Board of Directors

Alm. Brand A/S Group remuneration to the bank's Board of Directors:

Jørgen Hesselbjerg Mikkelsen (Chairman) 980 980 980 980

Boris Nørgaard Kjeldsen (Deputy Chairman) 730 730 730 730

Jan Skytte Pedersen 490 490 490 490

Arne Nielsen 185 570 185 570

Ebbe Castella 410 410 410 410

Anette Eberhard 386 - 386 -

Christian Bundgaard (elected by the employees) 160 160 160 160

Torben Jensen (elected by the employees) 160 160 160 160

Pia Støjfer (elected by the employees) 160 160 160 160

Total remuneration to the Board of Directors 3,661 3,660 3,661 3,660

No. of members of the Management Board 1 1 1 1

No. of members of the Board of Directors 9 9 9 9

The tax calculation for 2015 contains a tax deduction of DKK 0 million relating to remuneration to the Management Board (2014: DKK 1.7

million).

Remuneration to the Management Board comprises remuneration to Managing Director Kim Bai Wadstrøm.

In Alm. Brand Bank A/S, all employees, including the Management Board member, are entitled to a defined contribution pension plan. The

bank's costs for the Management Board member's pension plan appear from the note above.

The Management Board member and the bank are subject to a mutual notice of termination of 6-12 months. In the event of termination by the

bank, the Management Board member is entitled to severance pay equal to six months' remuneration.


42


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014


Share-based payment

Breakdown of outstanding share options:

Number of

share options Exercise price

Fair value

grant Expiry date

Granted on 2 September 2014 23,699 34.78 3.82 02.11.18

Granted on 9 March 2015 89,392 43.87 4.57 09.05.19

Granted on 1 September 2015 85,472 43.89 5.10 01.11.19

Performance pay

Key employees

Remuneration key management persons:

Fixed salary 8,245 10,881 8,245 10,881

Variable salary - - - -

Share-based payment 872 499 872 499

Pensions 933 824 933 824

Total remuneration to other senior employees 10,050 12,204 10,050 12,204

The agreement on share-based payment was made between the employees and Alm. Brand A/S. Accordingly, the bank has no further

obligations than hose recognised in the financial statements at 31 December 2015.

The bank has bonus scheme for a number of other employee groups. The bonus scheme will have no material effect on the banking group's cost

level and does not comprise share-based payment.

Remuneration to key management persons includes remuneration to Managing Director Kim Bai Wadstrøm. In 2014, remuneration to key

management persons also includes salary and termination benefits to former key persons.

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and

controlling the activities of the group.

Chief Executive Officer of Alm. Brand Søren Boe Mortensen is also a member of the Board of Directors, but he receives no separate

consideration for that office. Søren Boe Mortensen receives a total remuneration of DKK 8,347,000 as Chief Executive Officer of Alm. Brand A/S

(2014: DKK 8,271,000).

Alm. Brand A/S has established a share option programme for the senior management group of the Alm. Brand Group. The scheme, which can

only be exercised by purchasing the relevant shares, entitles the holders to purchase a number of shares in Alm. Brand A/S at a pre-determined

price. The options granted vest at the date of grant. The options will lapse if they remain unexercised 50 months after the date of grant.

The share option scheme forms part of the fixed salary and cannot exceed 13% thereof. The exercise price is calculated as a simple average of the

market price of Alm. Brand A/S on the fifth, sixth and seventh trading day after release of annual reports or half-year interim reports plus a 10%

premium.

In the Alm. Brand Group, the Management Board and specific key employees have been granted share options.

The weighted average remaining contractual term is three years, six months and 16 days.


43


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014


Remuneration to risk takers:

Fixed salary 44,661 19,927 44,661 19,927

Variable salary 100 100 100 100

Share-based payment 2,151 435 2,151 435

Pensions 6,808 2,268 6,808 2,268

Total remuneration to risk takers 53,720 22,730 53,720 22,730

Number of risk takers 41 19 41 19

Fees to auditors appointed by the shareholders in general meeting

Statutory audit 1,120 855 1,215 994

Assurance engagements other than audits 71 178 127 183

Other services 74 85 74 103

Total fees to auditors appointed by the shareholders in general meeting 1,265 1,118 1,416 1,280

NOTE 6 Impairment of loans, advances and receivables, etc.

Individual assessment:

Impairment and value adjustments, respectively, during the year 386,748 330,752 386,813 331,383

Reversal of impairment in previous years 146,062 204,657 146,262 205,212

Total individual assessment 240,686 126,095 240,551 126,171

Group assessment:

Impairment and value adjustments, respectively, during the year 44,268 117,565 44,565 118,064

Reversal of impairment in previous years 11,070 81,938 11,827 82,694

Other changes - - - -310

Total group assessment 33,198 35,627 32,738 35,060

Losses not previously provided for 24,021 24,498 24,671 25,573

Bad debts recovered 44,292 44,788 44,749 46,062

Total impairment of loans, advances and receivables, etc. 253,613 141,432 253,211 140,742

Risk takers are those persons who, in accordance with the Danish Executive Order on remuneration policy and public disclosure of salaries,

have a material influence on the company's risk profile.

Remuneration to risk takers also includes salary etc. in connection with severance. A one-off fee has been paid to risk takers, but no bonus has

been disbursed.


44


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 7 Profit/loss from investments in associates and group enterprises

Profit from investments in associates 943 4,005 943 4,005

Loss from investments in group enterprises 16,493 20,260 -2 12

Total profit/loss from investments in associates

and group enterprises 17,436 24,265 941 4,017

NOTE 8 Tax

Current tax on income for the year -118,155 -61,686 -155,358 -113,247

Changes in deferred tax 36,162 -4,799 73,545 42,789

Capitalisation of tax losses from previous years - -44,000 - -44,000

Withholding tax paid 2 - 2 -

Adjustment of previous years' current tax 52 -1,723 50 -1,724

Total tax -81,939 -112,208 -81,761 -116,182

Effective tax rate:

Current tax rate -77,736 -70,633 -77,694 -71,606

Adjustment for non-tax items and joint taxation -6,698 -1,091 -4,116 1,148

Change of date of utilisation of tax asset 2,549 5,239 - -

Capitalisation of tax losses from previous years - -44,000 - -44,000

Withholding tax on foreign shares -2 - -2 -

Adjustment of previous years' current tax -52 -1,723 51 -1,724

Total tax -81,939 -112,208 -81,761 -116,182

Total effective tax rate 24.8% 38.9% 24.7% 39.8%

NOTE 9 Discontinued activities

Income statement

Net interest and fee income - 3,594 - 3,594

Value adjustments - 2,747 - 2,747

Profit/loss in Alm. Brand Formue A/S - 10,576 - 21,687

Profit/loss on discontinued activities - 16,917 - 28,028

Cash flows

Cash flows from operating activities - 27,554

Cash flows from investing activities - 1,054,636

Cash flows from financing activities - -507,627

Total cash flows - 574,563

For additional information, see the overview of group companies in note 44.

Discontinued activities comprise the subsidiary Alm. Brand Formue A/S, which was liquidated in 2014.


45


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 10 Balances due from credit institutions and central banks

Balances at notice with central banks 14,002 - 14,002 -

Balances due from credit institutions 287,233 756,639 287,233 756,639

Total balances due from credit institutions and central banks 301,235 756,639 301,235 756,639

NOTE 11 Loans, advances and other receivables at fair value

Mortgage deeds 227,516 306,640 227,516 306,640

Total loans, advances and other receivables at fair value 227,516 306,640 227,516 306,640

NOTE 12 Loans, advances and other receivables at amortised cost

Loans and advances 6,156,991 6,383,736 5,475,021 5,745,702

Leases - - 28,713 48,240

Total before impairment, etc. 6,156,991 6,383,736 5,503,734 5,793,942

Impairment, etc 1,431,651 1,444,818 1,432,657 1,446,520

Total loans, advances and other receivables at

amortised cost, year-end 4,725,340 4,938,918 4,071,077 4,347,422

Assets held under finance leases

1 January - - 35,686 43,082

Additions during the year - - 15,077 31,013

Disposals during the year - - 22,050 38,409

Net investment in finance leases before other balances - - 28,713 35,686

Other balances regarding finance leases - - - 12,554

Net investment in finance leases - - 28,713 48,240

Gross investment in finance leases

Term of less than 1 year - - 18,349 28,301

Term of between 1 and 5 years - - 12,873 22,302

Term of more than 5 years - - - 335

Total - - 31,222 50,938

Of which unearned financial income - - 2,509 2,698

Net investment in finance leases - - 28,713 48,240

Of the total fair value adjustment of mortgage deeds for the year of minus DKK 28.5 million (2014: minus DKK 60.9 million), DKK 29.3 million

(2014: DKK 135.2 million) was attributable to credit losses. At 31 December 2015, the accumulated impairment writedowns on the bank’s

portfolio of mortgage deeds amounted to DKK 711 million (2014: DKK 806 million).


46


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 12 Loans, advances and other receivables at amortised cost - continued

Net investment in finance leases



Term of more than 5 years - - - 275

Total - - 28,713 48,240

Of which any unguaranteed residual value - - - -

Impairment of finance leases - - 234 549

Specification of loans, advances and other receivables for which there is

an objective indication of impairment


Loans, advances and other receivables before impairment 2,018,755 2,040,090 2,019,211 2,040,875

Impairment, etc. 1,246,149 1,292,513 1,246,806 1,293,408

Loans, advances and other receivables after impairment 772,606 747,577 772,405 747,467

Group assessment:

Loans, advances and other receivables before impairment 2,345,753 3,023,399 2,371,124 3,059,911

Impairment, etc. 185,502 152,305 185,850 153,112

Loans, advances and other receivables after impairment 2,160,251 2,871,094 2,185,274 2,906,799

Total loans, advances and other receivables after impairment 2,932,857 3,618,671 2,957,679 3,654,266

NOTE 13 Bonds at fair value

Government bonds 43,557 22,977 43,557 22,977

Mortgage credit bonds 3,865,219 7,091,070 3,865,219 7,091,070

Corporate bonds 45,614 86,575 45,614 86,575

Total bonds at fair value, year-end 3,954,390 7,200,622 3,954,390 7,200,622

Rating of bonds:

Rated AAA 3,424,804 6,749,260 3,424,804 6,749,260

Rated AA- til AA+ 319,528 20,020 319,528 20,020

Rated A- til A+ 64,461 122,189 64,461 122,189

Others 145,597 309,153 145,597 309,153

Bonds at fair value, year-end 3,954,390 7,200,622 3,954,390 7,200,622

Finance leases comprise car leases in the subsidiary Alm. Brand Leasing A/S.


47


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 14 Shares, etc.

Listed on NASDAQ OMX Copenhagen A/S 14,547 19,531 14,547 19,531

Listed on other stock exchanges 334 63,917 334 63,917

Other shares 199,541 152,846 199,541 152,846

Total other shares, etc., year-end 214,422 236,294 214,422 236,294

NOTE 15 Investments in associates

Cost, beginning of year 38,509 38,509 38,509 38,509

Disposals during the year -25,217 - -25,217 -

Cost, year-end 13,292 38,509 13,292 38,509

Adjustments, beginning of year 5,715 3,958 5,715 3,958

Share of profit for the year 944 4,005 944 4,005

Dividends -1,873 -2,248 -1,873 -2,248

Reversal of adjustments -5,655 - -5,655 -

Adjustments, year-end -869 5,715 -869 5,715

Carrying amount, year-end 12,423 44,224 12,423 44,224

NOTE 16 Investments in group enterprises

Cost, beginning of year 3,000 328,844 - -

Disposals during the year - -325,844 - -

Cost, year end 3,000 3,000 - -

Adjustments, beginning of year 81,941 -114,271 - -

Share of profit/loss for the year 16,495 16,520 - -

Disposals during the year - 175,912 - -

Other capital movements 50,000 3,780 - -

Adjustments, end of year 148,436 81,941 - -

Investments in parent company - 1,000 - 1,000

Carrying amount, year-end 151,436 85,941 - 1,000

NOTE 17 Investment properties

Fair value, beginning of period 22,581 36,960 160,081 36,960

Additions during the year 20,875 - 20,875 134,700

Disposals during the year 31,372 5,473 34,572 5,473

Fair value adjustment -1,266 -8,906 -1,266 -6,106

Carrying amount, year-end 10,818 22,581 145,118 160,081

Alm. Brand Bank A/S’s trading portfolio includes shares in the bank’s parent company, Alm. Brand A/S. A capital contribution of DKK 50 million

was made to Alm. Brand Leasing A/S in 2015.

Rental income from investment properties amounted to DKK 0.5 million in the parent company (2014: DKK 1.6 million) and DKK 9.7 million

in the group (2014: DKK 10.8 million). Direct costs relating to rental income-generating investment properties amounted to DKK 0.5 million

(2014: DKK 0.7 million) in the parent company and DKK 0.7 million (2014: DKK 1.0 million) in the group. Direct costs relating to non rental

income-generating investment properties amounted to DKK 1.5 million (2014: DKK 1.7 million) in the parent company and DKK 1.8 million

(2014: DKK 2.1 million) in the group.


48


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 18 Other property, plant and equipment

Operating equipment:

Cost, beginning of year 206 1,091 678,568 389,837

Additions during the year, including improvements - - 352,946 341,671

Disposals during the year 23 885 111,958 52,940

Cost, year-end 183 206 919,556 678,568

Depreciation and impairment losses, beginning of year 206 649 160,298 85,907

Depreciation for the year - 36 121,730 91,032

Reversed depreciation and impairment losses 23 479 17,705 16,641

Depreciation and impairment losses, year-end 183 206 264,323 160,298

Other balances regarding operating leases - - - -9,324

Carrying amount, year-end - - 655,233 508,946



Term of more than 5 years - - 201 189

Total - - 304,558 235,285

NOTE 19 Current tax assets

Tax receivable, beginning of year 98,508 183,768 150,069 166,114

Tax received in respect of prior years 75,122 186,641 126,683 168,988

Adjustment of previous years' current tax -23,386 2,873 -23,386 2,874

Current tax for the year 118,154 61,686 155,358 113,247

Tax paid for the year 913 708 913 708

Other adjustments - 36,114 - 36,114

Tax receivable, year-end 119,067 98,508 156,271 150,069

NOTE 20 Deferred tax assets

Deferred tax at beginning of year, net 214,419 202,884 299,712 335,765

Adjustment of prior-year deferred tax assets 23,341 -1,150 23,341 -1,150

Other adjustments - -36,114 - -36,114

Change in deferred tax recognised in the income statement -36,162 48,799 -73,545 1,211

Deferred tax at year-end, net 201,598 214,419 249,508 299,712

Operating leases comprise car leases in the subsidiary Alm. Brand Leasing A/S.

Deferred tax has been capitalised taking into account future earnings and the potential for utilisation. The banking group’s total tax asset

amounted to DKK 250 million at 31 December 2015 (2014: DKK 300 million), which has been fully capitalised.

Future minimum lease payments for non-terminable operating leases:


49


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 20 Deferred tax assets - continued

Deferred tax relates to the following items:

Operating equipment 1,758 2,290 1,803 2,350

Assets held temporarily 1,387 10,812 1,387 10,880

Lease assets - - 47,879 85,165

Net fees included in effective interest rate 976 621 911 742

Provisions for jubilees, severance payment, etc. 407 5,026 407 5,026

Provisions for bad debts, etc. 3,520 387 3,572 266

Loss to be carried forward 193,550 195,283 193,549 195,283

Deferred tax at year-end, net 201,598 214,419 249,508 299,712

NOTE 21 Assets held temporarily

Cars taken over - - - 9,291

Properties etc. taken over - 20,874 - 20,874

Assets held temporarily, year-end - 20,874 - 30,165

NOTE 22 Other assets

Interest and commissions receivable 38,540 83,462 38,384 83,401

Positive market value of derivatives 35,021 27,137 35,021 27,137

Other assets 62,505 49,845 86,272 52,565

Other assets, year-end 136,066 160,444 159,677 163,103

NOTE 23 Payables to credit institutions and central banks

Central banks - 1,004,817 - 1,004,817

Credit institutions 268,507 101,860 359,367 194,441

Payables to credit institutions and central banks, year-end 268,507 1,106,677 359,367 1,199,258

NOTE 24 Deposits and other payables

Deposits at call 5,649,609 4,504,268 5,615,930 4,504,268

At notice 1,649,108 5,394,466 1,649,108 5,394,466

Time deposits - - - -

Special categories of deposits 833,639 1,177,709 833,639 1,177,709

Deposits and other payables, year-end 8,132,356 11,076,443 8,098,677 11,076,443

NOTE 25 Other liabilities

Interest and commissions payable 20,702 35,007 20,703 35,012

Miscellaneous creditors 99,903 103,525 135,281 129,749

Other liabilities 16 13 16 16

Repo/reverse transactions, negative values 75,033 - 75,033 -

Negative market value of derivatives 47,299 38,026 47,299 38,026

Other liabilities, year-end 242,953 176,571 278,332 202,803


50


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 26 Provisions for pensions and similar liabilities

Provisions, beginning of year 1,760 1,412 1,760 1,412

New and adjusted provisions 492 236 492 236

Reversed provisions for the year 301 131 301 131

Provisions used during the year 38 - 38 -

Discounting effect -63 243 -63 243

Provisions, year-end 1,850 1,760 1,850 1,760

NOTE 27 Provisions for losses on guarantees

Provisions, beginning of year 11,016 8,150 11,016 8,150

Provisions for the year 5,169 6,047 5,169 6,047

Reversed provisions for the year 8,487 3,181 8,487 3,181

Provisions, year-end 7,698 11,016 7,698 11,016

NOTE 28 Subordinated debt

Additional tier 1 capital:

Fixed-rate bullet loans in DKK with indefinite terms 175,000 175,000 175,000 175,000

Additional tier 1 capital, year-end 175,000 175,000 175,000 175,000

Subordinated debt, year-end 175,000 175,000 175,000 175,000

Interest on subordinated debt 10,246 19,074 10,246 19,074

Of this, amortisation of costs incurred on raising the debt - 51 - 51

Extraordinary instalments - 425,949 - 425,949

NOTE 29 Share capital

Unlisted share capital:

Nominal value at 1 January 2008 351,000 351,000 351,000 351,000

Capital increase April 2009 300,000 300,000 300,000 300,000

Capital increase September 2009 90,000 90,000 90,000 90,000

Capital increase November 2009 280,000 280,000 280,000 280,000

Nominal value, year-end 1,021,000 1,021,000 1,021,000 1,021,000

Note 45 Capital and risk management and the risk report “Risk and Capital Management 2015” contain a description of the bank’s liquidity

management and funding situation. The risk report is available from the group’s website, www.almbrand.dk/risk.

The share capital consists of 1,021,000 shares of DKK 1,000 nominal value and is paid up in full.

The provision covers provisions for anniversaries, severance of service, etc. and has been calculated using an estimated likelihood of

disbursement.

The additional tier 1 capital of DKK 175 million was issued on 12 October 2006 and was subject to a rate of interest for the first ten-year term of

5.855%. Subsequently, the capital certificates carry interest at 3M CIBOR plus 2.70 percentage points.


51


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 30 Total capital

Shareholders' equity 1,494,887 1,743,740 1,494,887 1,743,740

Deduction of ownership interest in financial institution -5,792 -1,400 -7,494 -3,106

Deferred tax assets -201,598 -214,419 -249,508 -299,712

Prudent valuation -4,470 -7,854 -4,470 -7,854

Common equity tier 1 capital 1,283,027 1,520,067 1,233,415 1,433,068

Additional tier 1 capital 175,000 175,000 175,000 175,000

Reduction, additional tier 1 capital -70,000 -52,500 -70,000 -52,500

Deduction of ownership interest in financial institution -10,513 -5,601 -13,602 -12,425

Tier 1 capital 1,377,514 1,636,966 1,324,813 1,543,143

Tier 2 capital - - - -

Total capital 1,377,514 1,636,966 1,324,813 1,543,143

Total risk exposure amount:

Weighted items involving credit risk 6,167,989 6,733,157 6,200,849 6,645,806

Weighted items involving market risk 827,135 1,412,861 827,135 1,412,861

Weighted items involving operational risk 406,177 356,382 694,179 618,699

Total risk exposure amount, year-end 7,401,301 8,502,400 7,722,163 8,677,366

The solvency requirement represents 8% of the total

risk exposure amount 592,104 680,192 617,773 694,189

NOTE 31 Off-balance sheet items

Contingent liabilities:

Financial guarantees 44,505 73,266 44,505 73,266

Loss guarantees for mortgage loans 328,536 226,291 328,536 226,291

Registration and conversion guarantees 52,207 53,039 52,207 53,039

Other contingent liabilities 389,199 376,054 389,199 376,054

Contingent liabilities, year-end 814,447 728,650 814,447 728,650

Other commitments:

Irrevocable loan commitments 36,313 8,000 36,313 8,000

Commitments, year-end 36,313 8,000 36,313 8,000

Off-balance sheet items, year-end 850,760 736,650 850,760 736,650

The calculation of the total capital and the total risk exposure amount was made in accordance with the capital adequacy rules of CRR and CRD

IV.

The bank has additional tier 1 capital of DKK 175 million that does not meet the conditions of the CRR. In accordance with the transitional

rules, the recognition will be phased out over a ten-year period, and at year-end 2015 DKK 105 million of the additional tier 1 capital may be

Note 45 Capital and risk management and the risk report “Risk and Capital Management 2015” contain a calculation and description of the

bank’s capital and capital targets, including the individual solvency need. The risk report is available from the group’s website,

www.almbrand.dk/risk.


52


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 31 Off-balance sheet items - continued

Other contingent liabilities

Collateral security

Assets sold as part of repo transactions:

Bonds at fair value 186,500 - 186,500 -

Assets bought as part of reverse transactions:

Bonds at fair value 267,966 - 267,966 -

Assets received as collateral in connection with reverse transactions may be resold to third parties. If this is the case, a negative portfolio may

arise due to the accounting rules. This is recognised under “Other liabilities”. As at 31 December 2015, the fair value of financial assets accepted

as collateral security which have been sold or remortgaged amounted to DKK 186.5 million (2014: DKK 0 million). Alm. Brand Bank is required

to return similar securities.

Monetary counterparties in Danmarks Nationalbank can only obtain credit by providing collateral security in the form of pledging of approved

securities.

As part of its current operations, the bank at the end of 2015 provided collateral security to Danmarks Nationalbank and Clearstream in the

form of bonds representing a total nominal value of DKK 595 million (2014: DKK 1,875 million). The collateral security provided is not subject

to any special conditions.

As collateral for positive and negative fair values of derivative financial instruments, respectively, cash in the amount of DKK 3 million was

received and cash in the amount of DKK 123 million was paid at 31 December 2015 (2014: DKK 0 million and DKK 106 million).

In repo transactions (sale of securities which the group agrees to repurchase at a later date), the securities remain in the balance sheet, and the

consideration received is recognised under payables. Securities in repo transactions are treated as assets placed as collateral for obligations. The

counterparty is entitled to sell or remortgage the securities received.

In reverse transactions (purchase of securities that the group agrees to resell at a later date), the group is entitled to sell or remortgage the

securities. The securities are not recognised in the balance sheet, and the consideration paid is recognised under receivables.

Alm. Brand Bank A/S is a member of Bankdata, which operates the bank's key banking systems. Termination of this membership would cause

the bank to incur a significant liability which would have to be calculated in accordance with Bankdata's by-laws.

For Danish tax purposes, the company is taxed jointly with Alm. Brand A/S as administration company. As a result, the company is liable

according to the rules of the Danish Corporation Tax Act with effect from the 2013 financial year for income taxes etc. for the jointly taxed

companies and with effect from 1 July 2012 also for any obligation to withhold tax on interest, royalties and dividends on behalf of the jointly

taxed companies.

Alm. Brand Bank A/S has entered into operating leases with Alm. Brand Leasing A/S. The value of the leases totalled DKK 6 million at 31

December 2015 (2014: DKK 7 million).

Being an active financial services group, the group is a party to a number of lawsuits. The cases are reviewed on an ongoing basis, and the

necessary provisions are made. Management believes that these cases will not inflict further losses on the group.


53


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 32 By term to maturity

Cash in hand and balances at call with central banks

Balances at call 262,281 198,496 262,281 198,496

Cash in hand and balances at call with central banks, year-end 262,281 198,496 262,281 198,496

Balances due from credit institutions and central banks

Balances at call 155,453 156,639 155,453 156,639

Up to and including 3 months 145,782 600,000 145,782 600,000

Balances due from credit institutions and central banks, year-end 301,235 756,639 301,235 756,639

Loans and advances

Deposits at call 375,544 814,409 376,248 814,731


Over 3 months and up to and including 1 year 687,132 552,842 668,453 549,761

Over 1 year and up to and including 5 years 1,209,843 1,054,169 731,640 726,584

Over 5 years 1,851,252 2,272,981 1,851,517 2,273,657

Deposits at call, year-end 4,952,856 5,245,558 4,298,593 4,654,062

Bonds at fair value

Up to and including 1 year 1,122,298 3,248,339 1,122,298 3,248,339

Over 1 year and up to and including 5 years 1,320,363 1,708,589 1,320,363 1,708,589

Over 5 years 1,511,729 2,243,694 1,511,729 2,243,694

Bonds at fair value 3,954,390 7,200,622 3,954,390 7,200,622

Payables to credit institutions and central banks

Payables at call 79,308 101,860 79,308 101,860

Up to and including 3 months 189,199 - 190,927 1,712

Over 3 months and up to and including 1 year - 1,004,817 - 1,004,817

Over 1 year and up to and including 5 years - - 20,847 17,826

Over 5 years - - 68,285 73,043

Payables to credit institutions and central banks, year-end 268,507 1,106,677 359,367 1,199,258

Deposits and other payables

Deposits at call 5,649,609 4,504,268 5,615,930 4,504,268

Up to and including 3 months 1,747,760 5,534,895 1,747,760 5,534,895


Over 1 year and up to and including 5 years 114,337 157,018 114,337 157,018

Over 5 years 600,478 850,489 600,478 850,489

Deposits and other payables, year-end 8,132,356 11,076,443 8,098,677 11,076,443


54


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 32 By term to maturity - continued

Guarantees

Up to and including 1 year 195,678 199,608 195,678 199,608


Over 5 years 555,949 439,321 555,949 439,321

Guarantees, year-end 814,447 728,650 814,447 728,650

Financial liabilities




Over 5 years 7,020 2,763 7,020 2,763

Financial liabilities, year-end 143,034 73,034 143,035 73,039

NOTE 33 Credit risk

Loans and advances and guarantee debtors by sector and industry

Public authorities 0.0% 0.0% 0.0% 0.0%

Business sectors:

Agriculture, hunting, forestry and fishery 5.7% 10.7% 6.5% 11.8%

Manufacturing and raw materials extraction 0.1% 0.1% 0.1% 0.1%

Utilities 0.0% 0.3% 0.0% 0.4%

Construction 0.0% 0.0% 0.2% 0.2%

Trade 0.0% 0.3% 0.2% 0.4%

Transport, hotels and restaurants 0.0% 0.0% 0.0% 0.0%

Information and communication 0.0% 0.0% 0.0% 0.0%

Financing and insurance 20.7% 16.2% 10.3% 6.2%

Real property 13.7% 18.5% 14.9% 20.1%

Other business 3.2% 3.2% 4.2% 3.9%

Total business sector 43.4% 49.3% 36.4% 43.1%

Private customers 56.6% 50.7% 63.6% 56.9%

Total 100.0% 100.0% 100.0% 100.0%


55


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 33 Credit risk - continued

Impairment


Impairment, beginning of year 1,303,529 1,334,312 1,304,734 1,336,139

Impairment during the year 386,748 330,751 386,813 331,073

Reversal of impairment 146,062 204,657 146,572 205,212

Loss (written off) 290,368 156,878 290,470 157,576

Impairment, year-end 1,253,847 1,303,529 1,254,504 1,304,424

Group assessment:

Impairment, beginning of year 152,305 116,678 153,112 117,742

Impairment during the year 44,267 117,566 44,565 118,064

Reversal of impairment 11,070 81,939 11,827 82,694

Impairment, year-end 185,502 152,305 185,850 153,112

Total impairment, year-end 1,439,349 1,455,834 1,440,354 1,457,536

Interest income relating to loans, advances and receivables,

etc. written down 30,136 33,866 30,136 33,866

Reasons for individual impairment writedowns

and provisions

Loans, advances and other receivables before impairment and provisions:

Insolvency proceedings 272,012 245,357 272,012 245,357

Debt collection 110,451 76,168 110,907 76,940

Uncollectible claims 1,649,653 1,736,061 1,649,653 1,736,061

Loans, advances and other receivables before impairment

and provisions, year-end 2,032,116 2,057,586 2,032,572 2,058,358

Impairment and provisions:

Insolvency proceedings 251,718 205,499 251,718 205,499

Debt collection 93,727 66,517 94,384 67,412

Uncollectible claims 908,402 1,031,513 908,402 1,031,513

Impairment and provisions, year-end 1,253,847 1,303,529 1,254,504 1,304,424

Loans, advances and other receivables after impairment

and provisions, year-end 778,269 754,057 778,068 753,934


56


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014


Description of value of collateral for loans impaired after individual

assessment

Value of security:

Real property, private 83,180 73,283 83,180 73,283

Real property, commercial 808,947 788,086 808,947 788,086

Cash, deposits and highly marketable securities 8,384 9,176 8,384 9,176

Cars 699 631 954 1,047

Other security 88,438 63,700 88,438 63,700

Total value of collateral for loans impaired after

individual assessment, end of year 989,648 934,876 989,903 935,292

The collateral security is marked to market on the basis of the following:

Goods, other security: Based on an individual assessment.

Realised security, including conditions

Value of realised security:

Real property, private - 4,132 - 4,132

Cars - - 1,382 1,533

Total value of realised collateral - 4,132 1,382 5,665

Loans, advances and other receivables, etc. in arrears

Age distribution of assets due but not impaired at the balance sheet date:

Up to 3 months 2,470 5,214 2,478 5,301

3 to 6 months 121 7,884 121 7,884

6 to 12 months 1,225 816 1,226 816

More than 12 months 717 398 1,047 728

Arrears, year-end 4,533 14,312 4,872 14,729

Real property: Estate agent valuation, reasoned internal assessment or public assessment considering type of property, location, condition and

estimated marketability.

Cash and cash equivalents: Official price where available and otherwise the transaction price obtainable in a transaction between independent

parties.

Goods, other security: Based on an individual assessment.

The collateral security stated is unstressed. In the calculation of impairment writedowns on agricultural and property exposures in financial

difficulty, the value of collateral security is calculated on the basis of realisable value upon a sale within six months.

Forced realisation of collateral becomes necessary if the bank cannot induce the creditor or the provider of collateral security to enter into a

voluntary agreement on realisation. The bank always seeks to maximise the value of collateral by way of forced realisation.

Before forced realisation of collateral is initiated, the debtor and/or the provider of collateral will receive typically eight days’ notice, however,

shorter notice may be given in the case of an obvious risk of imminent impairment of the value of the collateral.


57


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014


Value of security for loans in arrears

Value of security:

Real property, private 106,611 113,599 106,611 113,599

Real property, commercial 25,439 174,560 25,439 174,560

Cash and marketable securities 4,364 3,686 4,364 3,686

Cars 1,786 2,566 2,162 3,718

Other securities 440 42,892 440 42,892

Total value of collateral for loans in arrears, year-end 138,640 337,303 139,016 338,455

Maximum exposure to credit risk

Maximum credit risk at the balance sheet date without taking into account

security.

On-balance sheet exposures:

Cash in hand and balances at call with central banks 262,281 198,496 262,281 198,496

Balances due from credit institutions and central banks 301,235 756,639 301,235 756,639

Loans, advances and other receivables at fair value 227,516 306,640 227,516 306,640

Loss option to hedge mortgage deeds in Alm. Brand Forsikring 1,574,887 1,873,660 1,574,887 1,873,660

Loans, advances and other receivables at amortised cost 4,725,340 4,938,918 4,357,112 4,357,112


Shares, etc. 214,422 236,294 214,422 236,294

Other assets 136,066 160,444 159,677 163,103

Maximum exposure to credit risk, year-end 11,396,137 15,671,713 11,051,520 15,092,566

Off-balance sheet items:

Contingent liabilities 814,447 728,650 814,447 728,650

Irrevocable loan commitments 36,313 8,000 36,313 8,000

Total value of security at the balance sheet date

Value of securitiy:

Real property, private 1,979,409 1,859,988 1,979,409 1,859,988

Real property, commercial 1,884,994 1,977,749 1,858,494 1,947,749

Cash and marketable securities 87,532 83,065 87,532 83,065

Cars 51,735 37,800 56,144 52,451

Other security 191,691 135,911 191,691 135,911

Total value of collateral, year-end 4,195,361 4,094,513 4,173,270 4,079,164

The collateral security is marked to market as described above.

Under the total credit exposure, DKK 1.6 billion (2014: 1,9 billion) concerns a loss option to cover mortgage deeds in Alm. Brand Forsikring,

whereas the associated collateral in real property is not included.


58


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014


Credit quality

Loans, advances and other receivables at fair value - by credit quality

category:

Loans and advances with normal credit quality 84,998 81,704 84,998 81,704

Loans and advances with certain indications of weakness 20,454 1,756 20,454 1,756

Loans and advances with substantial weaknesses 33,930 44,130 33,930 44,130

Loans that are neither due nor impaired 139,382 127,590 139,382 127,590

Loans and advances with an objective indication of impairment 799,004 985,383 799,004 985,383

Total residual debt before value adjustments etc. 938,386 1,112,973 938,386 1,112,973

Value adjustments etc. -710,870 -806,333 -710,870 -806,333

Loans, advances and other receivables at fair value, year-end 227,516 306,640 227,516 306,640

Loans, advances and other receivables at amortised cost - by credit quality

category:

Loans and advances with normal credit quality 2,713,706 2,200,310 2,084,616 1,636,530

Loans and advances with certain indications of weakness 978,366 1,186,602 953,412 1,159,473

Loans and advances with substantial weaknesses 152,535 523,010 152,535 523,009

Loans that are neither due nor impaired 3,844,607 3,909,922 3,190,563 3,319,012

Loans and advances with an objective indication of impairment 2,312,384 2,473,814 2,313,171 2,474,930

Total gross loans and advances before value adjustments etc. 6,156,991 6,383,736 5,503,734 5,793,942

Impairment writedowns etc. -1,431,651 -1,444,818 -1,432,657 -1,446,520

Loans, advances and other receivables at amortised cost, year-end 4,725,340 4,938,918 4,071,077 4,347,422

Guarantee debtors - by credit quality category:

Guarantee debtors with normal credit quality 528,539 449,368 528,539 449,368

Guarantee debtors with certain indications of weakness 145,283 126,509 145,283 126,509

Guarantee debtors with substantial weaknesses 1,496 33,813 1,496 33,813

Guarantee debtors that are neither due nor impaired 675,318 609,690 675,318 609,690

Guarantee debtors with an objective indication of impairment 146,827 129,976 146,827 129,976

Total guarantee debtors before provisions etc. 822,145 739,666 822,145 739,666

Provisions etc. -7,698 -11,016 -7,698 -11,016

Total guarantee debtors, year-end 814,447 728,650 814,447 728,650

The credit quality is quantified on the basis of the credit quality categories of the Danish FSA, according to which loans and advances with

normal credit quality are categorised in 2a and 3, loans and advances with certain indications of weakness are categorised in 2b, loans and

advances with substantial weaknesses are categorised in 2c and loans and advances with an objective evidence of impairment are categorised in

category 1.

Of value adjustments etc. of DKK -711 million (2014: DKK -806 million), DKK -727 million (2014: DKK -824 million) was attributable to credit-

related value adjustments at 31 December 2015.


59


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 34 Market risk

Foreign exchange risk

Foreign currency positions:

Long positions 2,185,171 2,431,717 2,185,171 2,431,717

Short positions 2,330,435 2,428,084 2,330,435 2,428,084

Net positions 145,264 -3,633 145,264 -3,633

Foreign currency positions distributed on the five largest net positions:

EUR 166,769 -42,135 166,769 -42,135

NOK -22,553 1,176 -22,553 1,176

SEK 8,222 6,378 8,222 6,378

GBP -5,040 -605 -5,040 -605

JPY 4,804 1,481 4,804 1,481

Other -6,938 30,073 -6,938 30,073

Total foreign currency positions 145,264 -3,633 145,264 -3,633

Exchange rate indicator 1 180,052 55,915 180,052 55,915

Exchange rate indicator 1 as a percentage of tier 1 capital

after deductions 13.1% 3.4% 13.6% 3.6%

Exchange rate indicator 2 864 476 864 476

Exchange rate indicator 2 as a percentage of tier 1 capital

after deductions 0.1% 0.0% 0.1% 0.0%

Interest rate risk

The Danish FSA's method:

Total interest rate exposure on debt instruments, etc. 6,466 35,295 4,859 30,868

Interest rate exposure by currency subject to the greatest risk:

DKK 5,130 20,371 3,523 15,944

EUR 447 11,487 447 11,487

SEK 468 3,294 468 3,294

GBP 415 1 415 1

USD -5 180 -5 180

NOK 14 -15 14 -15

Other -3 -23 -3 -23

Total interest rate risk 6,466 35,295 4,859 30,868

Total interest rate risk within the trading portfolio 21,466 64,415

Total interest rate risk within the trading portfolio calculated

according to the banking group’s internal approach 15,046 57,900

Total interest rate risk outside the trading portfolio -16,607 -33,547

Interest rate risk is measured as the expected loss on interest rate positions that would result from an immediate upwards or downwards

change in all interest rates by 1 percentage point. The interest rate risk is calculated for each currency.


60


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 35 Genuine purchase and resale transactions

Of the assets below, genuine purchase and resale transactions amount to:

Balances due from credit institutions and central banks 81,780 - 81,780 -

Other receivables 189,199 - 189,199 -

Genuine purchase and resale transactions, year-end 270,979 - 270,979 -

NOTE 36 Genuine sale and repurchase transactions

Of the liabilities below, genuine sale and repurchase transactions amount to:

Payables to credit institutions and central banks 189,199 - 189,199 -

Deposits and other payables - - - -

Genuine sale and repurchase transactions, year-end 189,199 - 189,199 -

NOTE 37 Related parties

Related parties comprise:

● Alm. Brand af 1792 fmba (ultimate parent company)

● Alm. Brand Formue A/S (liquidated at 4 September 2014)

● Alm. Brand Leasing A/S (wholly-owned subsidiary)

● Nordic Corporate Investment A/S (sold at May 2015)

● Cibor Invest A/S (associate)

● Hirlap Finans ApS (liquidated at 15 June 2014)

● Ejendomsselskabet af 05.08.2010 ApS (sold at 30 June 2014)

● Ejendomsselskabet af 16.03.2010 ApS (wholly-owned subsidiary)

● K/S Juventusvej (wholly-owned subsidiary)

● ApS Juventusvej komplementar (wholly-owned subsidiary)

● Other companies in the Alm. Brand Group

● Management Board and Board of Directors of Alm. Brand A/S

● Key persons in the Alm. Brand Group

Loans, etc.

Board of Directors, Alm. Brand Bank A/S 2,262 2,017 2,558 2,699

Key Employees, Alm. Brand Bank A/S 876 4,366 876 4,366

Management Board, Alm. Brand A/S 959 931 959 931

Board of Directors, Alm. Brand A/S 6 866 299 1,548

Related parties also comprise related family members of the Management Board, Board of Directors and Key Employees and companies in

which the individuals mentioned above have material interests.

Amount of loans granted, mortgages received from and guarantees with related security issued by the Alm. Brand Bank Group for the below-

mentioned officers, their related family members and any companies controlled by them:


61


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 37 Related parties - continued

Guarantees

Board of Directors, Alm. Brand Bank A/S 1,700 1,700 1,700 1,700

Key Employees, Alm. Brand Bank A/S 976 - 976 -

Management Board, Alm. Brand A/S 450 450 450 450

Board of Directors, Alm. Brand A/S - 771 - 771

In addition, the bank has made an asset management agreement with the other companies of the Alm. Brand Group, according to which a

substantial proportion of the group’s assets are under management with the bank.

Other than the above, no material intra-group transactions have taken place.

Salaries and remuneration to members of the bank's Management Board, Board of Directors and Key Employees are disclosed in note 5 “Staff

costs and administrative expenses”. No other financial relations have been identified to members of the Management Board, Board of Directors,

Loans in DKK to the Management Board, the Board of Directors and Key Employees carry interest in the interval of 2.18%-8.50% p.a.

Alm. Brand Bank is the Alm. Brand group's primary banker. This involves the conclusion of a number of agreements between the bank and the

other group companies, and there is a regular flow of transactions between the bank and the rest of the group. All agreements and transactions

between the bank and the companies are made on an arm’s length or cost recovery basis in accordance with applicable legislation for intra-

group transactions.

The Alm. Brand Group has intra-group functions that solve joint administrative tasks for group companies. The consideration paid for this

administrative function is fixed on an arm's length basis or, where there is no specific market, on a cost-recovery basis. The bank reinvoices part

of the administration fee to its subsidiaries.

An arm’s length agreement has been signed on interest accruing on intra-group accounts between the bank and the other group companies.

On 11 December 2014, Alm. Brand Bank sold non-delinquent mortgage deeds with a total carrying amount of DKK 1.9 billion to Alm. Brand

Forsikring. Concurrently with the transaction, an option agreement was signed, under which Alm. Brand Forsikring can return mortgage deeds

to the bank if a debtor defaults on his payment obligations. This means that Alm. Brand Bank retains the underlying credit risk relating to the

mortgage deeds, whereas market risks are transferred to Alm. Brand Forsikring, including the risk of interest rate changes and prepayments.

The mortgage deeds are no longer recognised in the bank’s balance sheet as significant risks and rewards have been transferred to Alm. Brand

Forsikring.

The amount that best represents Alm. Brand Bank’s maximum exposure is the total fair value of the portfolio of mortgage deeds in Alm. Brand

Forsikring, corresponding to DKK 1.6 billion at 31 December 2015 (31 December 2014: DKK 1.9 billion). In practice, the exposure constitutes a

smaller amount, as Alm. Brand Bank also receives collateral in real estate in connection with any buybacks. Alm. Brand Bank recognises the

value of the option agreement under other liabilities.

Concurrently with the sale of mortgage deeds, Alm. Brand Bank and Alm. Brand Forsikring have entered into a management agreement on the

handling of the portfolio of mortgage deeds. In 2015, the bank received a management fee of DKK 11 million (2014: 0.6 million) and an option

premium of DKK 34.4 million (2014: DKK 2 million). The bank has received an accumulated management fee of DKK 11.6 million and an

accumulated option premium of DKK 36.4 million. The option had a negative market value of DKK 16.5 million at 31 December 2015 (2014:

DKK -1.4 million). A loss of DKK 46 million has been accumulated on the option.

Moreover, the company has had an agreement with Alm. Brand Formue concerning management of Alm. Brand Formue’s portfolio. All specific

investment decisions were made by Alm. Brand Bank pursuant to this asset management agreement. Accordingly, Alm. Brand Formue bought

and sold securities through the bank. The management agreement lapsed when the company entered into solvent liquidation in March 2014.


62


OVERVIEWNOTES


DKK '000 2015 2014 2015 2014

NOTE 37 Related parties - continued

Financial relations, Alm. Brand af 1792 fmba

Payables 82,348 83,484 82,348 83,484

Interest and fee expenses 4,393 4,394 4,393 4,394

Purchase of securities, etc. 95,921 348,376 95,921 348,376

Sale of securities, etc. 186,087 364,232 186,087 364,232

Financial relations, Alm. Brand Formue

Interest and fee income - 3,597 - -

Interest and fee expenses - 4 - -

Administration fee - 1,428 - -

Purchase of securities, etc. - 1,184,535 - -

Sale of securities, etc. - 100,720 - -

Finansielle relationer, Alm. Brand Leasing

Receivables 664,747 635,533 - -

Interest and fee income 15,849 11,626 - -

Administration fee 28,040 27,095 - -


63


OVERVIEWNOTES

Group

Positive Negative Positive Negative Positive Negative Positive Negative

Foreign exchange contracts

Forward transactions/

futures, bought 2,449 376 5,148 1,655 6,879 18,723 3,034 1,701


futures, sold 137 1,708 1,997 6,642 1,479 11,220 2,182 4,117

Options, bought 1,476 - 3,232 - 12,130 13 5,695 397

Options, written - 1,281 - 3,470 18 12,972 68 6,061

Interest rate contracts


futures, bought 11 78 - - 83 203 98 -


futures, sold 99 14 - - 654 138 - 180

Swaps 19,297 16,204 1,533 9,096 21,405 14,837 380 98,147

Options, bought - - 485 - 35 7 110 -

Options, written - 16,489 - 1,798 4 8,245 - 275

Share contracts


futures, bought - 9,618 - 9,969 383 1,340 548 1,104


futures, sold 9,618 - 9,913 56 1,350 435 1,112 864

Options, bought 133 - 970 - 1,653 - 2,577 -

Options, written - - - - 4 20 - 1,311

Derivatives, year-end 33,220 45,768 23,278 32,686 46,077 68,153 15,804 114,157

Unsettled spot transactions

Foreign exchange

contracts, bought 429 94 198 990

Foreign exchange

contracts, sold 70 288 432 907

Interest rate

contracts, bought 451 400 1,420 1,857

Interest rate contracts, sold 604 394 1,562 1,362

Share contracts, bought 159 193 85 153

Share contracts, sold 88 162 162 71

Unsettled spot

transactions, year-end 1,801 1,531 3,859 5,340

Total 35,021 47,299 27,137 38,026

NOTE 38 Derivatives

Market value 2015 Market value 2014

Average

market value 2015

Average

market value 2014


64


OVERVIEWNOTES

Group

DKK '000 2015 2014 2013 2012 2011

NOTE 39 Financial highlights and key ratios

Net interest and fee income 387,613 386,152 395,242 373,735 470,189

Value adjustments -104,608 -162,333 -225,022 -130,314 -387,244

Staff costs and administrative expenses 397,357 395,720 419,894 439,502 455,843

Impairment of loans, advances and receivables, etc. 253,211 140,742 196,316 309,120 768,450

Profit/loss from investments in associates

group enterprises 941 4,017 315 -2,345 385

Profit/loss on continuing activities -248,853 -176,089 -385,269 -456,015 -927,145

Profit/loss on discontinued activities - 28,028 19,203 51,746 -23,059

Profit for the year -248,853 -148,061 -366,066 -404,269 -950,204

Loans and advances 4,298,593 4,654,062 7,339,542 8,395,994 10,217,017

Shareholders' equity 1,494,887 1,743,740 1,695,946 1,168,636 1,233,700

Total assets 10,415,817 14,410,645 16,295,985 17,902,640 21,392,869

Total capital ratio 17.2 17.8 18.4 18.5 16.8

Tier 1 capital ratio 17.2 17.8 17.7 13.9 11.0

Return on equity before tax (%) -20.4 -15.7 -33.8 -41.6 -94.5

Return on equity after tax (%) -15.4 -8.8 -27.9 -30.6 -75.8

Income/cost ratio 0.59 0.56 0.38 0.42 0.08

Interest rate risk (%) 0.4 2.0 3.4 1.5 -0.9

Foreign exchange position (%) 13.6 3.6 21.3 7.1 5.3

Foreign exchange risk (%) 0.1 0.0 0.2 0.1 0.2

Loans and advances as a percentage of deposits (%) 70.8 55.1 80.3 87.8 148.0

Gearing of loans and advances 2.9 2.7 4.3 7.2 8.3

Annual growth in lending (%) -11.7 -36.6 -12.6 -17.8 -18.2

Excess coverage relative to statutory liquidity requirement (%) 270.6 322.0 201.6 248.7 319.6

Total amount of large exposures (%) 146.8 58.5 63.0 60.9 68.0

Impairment ratio for the year 3.9 2.1 2.1 2.8 6.0

Return on capital employed (%) -2.4 -1.0 -2.2 -2.3 -4.4

Financial highlights and key ratios have been prepared in accordance with IFRS and "Recommendations & Financial Ratios 2010" issued by the Danish Society of

Financial Analysts.


65


OVERVIEWNOTES

Parent company

DKK '000 2015 2014 2013 2012 2011

NOTE 39 Financial highlights and key ratios - continued

Net interest and fee income 393,289 379,140 382,377 357,861 448,044

Value adjustments -104,608 -165,133 -225,022 -130,314 -387,243

Staff costs and administrative expenses 361,829 355,962 387,904 409,912 426,952

Impairment of loans, advances and receivables, etc. 253,613 141,432 196,419 309,657 766,625

Profit/loss from investments in associates

group enterprises 17,436 24,265 -16,778 -3,227 784

Profit on continuing business -248,853 -176,089 -385,268 -404,269 -927,102

Profit/loss on discontinued activities - 16,917 -6,439 13,076 8,883

Profit for the year -248,853 -159,172 -391,707 -391,193 -918,219

Loans and advances 4,952,856 5,245,558 8,100,540 9,144,006 10,521,202

Shareholders' equity 1,494,887 1,743,740 1,502,912 995,440 1,092,861

Total assets 10,323,257 14,291,832 15,614,866 17,406,694 20,895,193

Total capital ratio 18.6 19.3 20.3 19.4 16.8

Tier 1 capital ratio 18.6 19.3 19.2 14.1 10.7

Return on equity before tax (%) -20.4 -17.1 -43.2 -52.1 -106.3

Return on equity after tax (%) -15.4 -10.0 -34.7 -39.3 -84.6

Income/cost ratio 0.49 0.46 0.22 0.32 0.06

Interest rate risk (%) 0.5 2.2 2.5 -1.8 -2.4

Foreign exchange position (%) 13.1 3.4 12.5 1.6 10.6

Foreign exchange risk (%) 0.1 0.0 0.2 0.0 0.1

Loans and advances as a percentage of deposits (%) 78.5 60.4 87.3 94.4 151.6

Gearing of loans and advances 3.3 3.0 5.4 9.2 9.6

Annual growth in lending (%) -9.2 -35.2 -11.4 -13.1 -18.1

Excess coverage relative to statutory liquidity requirement (%) 272.3 323.0 202.0 255.6 327.3

Total amount of large exposures (%) 141.1 55.2 52.6 62.1 68.7

Impairment ratio for the year 3.5 1.9 1.9 2.7 5.8

Return on capital employed (%) -2.4 -1.1 -2.5 -2.2 -4.4

Financial highlights and key ratios have been prepared in accordance with the Danish Financial Business Act.


66


OVERVIEWNOTES

Group

DKK '000 2015 2014

NOTE 40 Fair value measurement of financial instruments

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assets

at fair value:

Loans, advances and other

receivables at fair value - - 227,516 227,516 - - 306,640 306,640

Bonds at fair value 3,954,390 - - 3,954,390 7,200,622 - - 7,200,622

Shares, etc. 14,881 121,758 77,783 214,422 19,882 138,592 77,820 236,294

Total derivatives - 35,021 - 35,021 - 27,137 - 27,137

Other assets

Investment properties - - 145,118 145,118 - - 160,081 160,081

Assets temporarily

acquired - - - - - - 30,165 30,165

Other assets - 38,384 - 38,384 - 83,401 - 83,401

Financial assets

at fair value, year-end: 3,969,271 195,163 450,417 4,614,851 7,220,504 249,130 574,706 8,044,340


at fair value:

Total derivatives - 105,843 16,489 122,332 - 36,596 1,430 38,026

Liabilities temporarily

acquired - - - - - 624 - 624

Other liabilities - 20,703 - 20,703 - 35,012 - 35,012


at fair value, year-end: - 126,546 16,489 143,035 - 72,232 1,430 73,662

The process for recognising fair values has been structured so that effective segregation of duties has been set up between the departments in the

bank that report, monitor and effect the transactions. Reconciliation procedures have been set up for the purpose of identifying material

discrepancies across the various reports and source systems used.

The fair value is the price obtained in a sale of an asset or paid for transferring a liability in an arm’s length transaction at the time of

measurement. The fair value may be identical to the net asset value if the net asset value is calculated on the basis of underlying assets and

liabilities measured at fair value. There are three levels of fair value measurement:

Level 1 is based on quoted (unadjusted) prices in active markets.

Level 2 is used where no quoted price is available but where the use of another official price is deemed to best reflect the fair value.

Level 3 is used for financial assets and liabilities for which a quoted price or other official price is not available or is deemed not to reflect the fair

value. Instead, measurement techniques and other observable market data are used to determine the fair value. In the cases in which observable

prices based on market data are not available or are not deemed to be usable for the determination of fair value, recognised techniques, including

discounted cash flows, and internal models and assumptions are used for the determination of fair value. The assumptions may include recent

transactions involving comparable assets or liabilities, interest rates, exchange rates, volatility, credit spreads, etc. The bank’s unlisted shares that

are not measured at a redistribution price belong to this category.

Transfer between the categories of the fair value hierarchy is only effected in case of changes to available data for use in measurement. There

have been no transfers between categories in the fair value hierarchy in 2015.


NOTES

67


OVERVIEW

NOTE 40 Fair value measurement of financial instruments, continued

Derivative financial instruments comprise interest rate swaps, which are measured by way of calculation of the net present value of expected

future cash flows discounted on the basis of obtainable interest rate points, interpolation between interest rate points and exchange rates. Listed

futures and options are measured on the basis of obtainable prices. Unlisted options are measured on the basis of obtainable volatilities, prices of

underlying assets and exercise prices using Black-Scholes. Forward exchange transactions are measured on the basis of obtainable forward

premiums and exchange rates. The option, which was concluded with Alm. Brand Forsikring in connection with Alm. Brand Forsikring’s

purchase of the bank’s mortgage deeds, is measured at the value of the unsecured part of sell-back candidates at 31 December plus the value of

delinquent mortgage deeds which have not yet been sold back.

Loans, advances and other receivables at fair value include mortgage deeds. Mortgage deeds in default are measured on the basis of a credit

model, while mortgage deeds which are not in default are measured on the basis of a market value model. Measurement under the credit model

entails that mortgage deeds in default are written down to the unsecured part when one of the default criteria materialises. Under the market

value model valuation, a present value of the expected future cash flows is estimated. The valuation is based in part on observable market data

(interest rates) and in part on expected future redemption and loss rates. Measurement at fair value is based on a swap yield curve plus 50 basis

points and expected repayment rates between 0% and 14.1%, depending on the remaining term to maturity, and expected loss rates in the 0.75%

to 4.25% range, depending on property type and loan-to-value ratios. If the average expected repayment rate is increased by 1 percentage point

and the expected loss rates are increased by 0.5 of a percentage point, the fair value under the market value model would decline by DKK 1.2

million.

Bonds at fair value primarily comprises Danish mortgage bonds and, to a lesser extent, Danish government bonds and corporate bonds. All

bonds are measured at quoted prices. Bond ratings are disclosed in note 13 to the financial statements.

Other assets comprise interest and commission receivable. Interest rates are measured on the basis of normal principles of accrual.

Shares, etc. comprises listed shares measured at quoted prices and unlisted shares for which the input is not based on directly observable market

data. The bank’s unlisted shares consist of sector-owned companies and shares received for credit-defence purposes. For unlisted shares in sector-

owned companies where the shares are redistributed, such redistribution is considered to represent the primary market for the shares. The fair

value is determined as the redistribution price, and the shares are recognised as level 2 assets. For other unlisted shares in sector-owned

companies and shares received for credit-defence purposes where no observable input is available, the valuation is based on an estimate which

builds on information from the companies’ financial statements, experience from transactions involving shares in the companies in question as

well as input from qualified third parties.

Investment property comprises single-family houses and rental property which are not expected to be sold within 12 months. Single-family

houses are measured on the basis of valuations received from external appraisers. Rental property is measured on the basis of a cash flow model

that takes into account a return requirement which is dependent on location, financial strength of tenants, lease terms and use, etc. Rental

property is supplemented by valuations received from external appraisers if the property is deemed to be difficult to sell. If the valuation of single-

family houses is lowered by 15%, and the required rate of return on rental property is increased by 1 percentage point, the fair value would

change by DKK 17.9 million.

Assets held temporarily comprise single-family houses, rental property and returned vehicles expected to be sold within the next 12 months.

Single-family houses and rental property are measured according to the same methods as investment property or at cost where this is lower. As

at 31 December 2015, the bank had no assets held temporarily.


68


OVERVIEWNOTES

Group

DKK '000 2015

Level 3: Shares

Loans and

other recei-

vables at fair

value

Invest-ment

properties

Assets tempo-

rarily

acquired Derivatives Total

Carrying amount, beginning of year 77,820 306,640 160,081 30,165 1,430 576,136

Additions during the year 5,003 16,751 20,875 - - 42,629

Disposals during the year - -67,371 -34,572 -30,165 - -132,108

Value adjustment through profit or loss total -5,040 -28,504 -1,266 - -15,059 -49,869

Carrying amount, year-end 77,783 227,516 145,118 - 16,489 436,788

Realised value adjustments - -27,009 -1,009 - - -28,018

Unrealised value adjustments -5,040 -1,495 -257 - -15,059 -21,851

Value adjustment through profit or loss total -5,040 -28,504 -1,266 - -15,059 -49,869

Group

DKK '000 2014

Level 3: Shares

Loans and

other recei-

vables at fair

value

Invest-ment

properties

Assets tempo-

rarily

acquired Derivatives Total

Carrying amount, beginning of year 70,047 2,497,207 36,960 204,971 - 2,809,185

Additions during the year 3,341 - 134,700 2,840 - 140,881

Disposals during the year -380 -2,129,619 -5,473 -174,197 - -2,309,669

Value adjustment through profit or loss total 4,812 -60,948 -6,106 -3,449 -1,430 -67,121

Carrying amount, year-end 77,820 306,640 160,081 30,165 -1,430 573,276

Realised value adjustments 359 -135,238 -1,142 -645 -136,666

Unrealised value adjustments 4,453 74,290 -4,964 -2,804 -1,430 69,545

Value adjustment through profit or loss total 4,812 -60,948 -6,106 -3,449 -1,430 -67,121

NOTE 40 Fair value measurement of financial instruments, continued

Value adjustments for the year are composed as follows:

Value adjustments for the year are composed as follows:

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69


OVERVIEWNOTES

NOTE 41 Offsetting

Group

DKK '000 2015

Financial assets

Financial

instruments

Financial

collateral Net amounts

Derivatives 35,021 - 35,021 10,156 14,612 10,253

Reverse agreements 270,979 - - - 270,979 -

Total 306,000 - 35,021 10,156 285,591 10,253


Financial

instruments

Financial


Derivatives 47,299 - 47,299 10,156 19,535 17,608

Repo agreements 189,199 - - - 189,199 -

Total 236,498 - 47,299 10,156 208,734 17,608

Group

DKK '000 2014

Financial assets

Financial

instruments

Financial


Derivatives 27,137 - 27,137 7,268 19,869 -

Total 27,137 - 27,137 7,268 19,869 -


Financial

instruments

Financial


Derivatives 38,026 - 38,026 7,268 30,758 -

Total 38,026 - 38,026 7,268 30,758 -

Gross

recognised

assets

Liabilities

offset in the

balance sheet

Financial

assets stated at

net amounts in

the balance

sheet

Related amounts which

have not been offset in

the balance sheet

Financial

assets stated at

net amounts in

the balance

sheet



the balance sheet

Gross

recognised

assets

Liabilities

offset in the

balance sheet

Financial

assets stated at

net amounts in

the balance

sheet



the balance sheet

Derivative financial instruments are recognised in the balance sheet at fair value. Positive fair values are included in “Other assets”, while

negative fair values are included in “Other liabilities”. Financial instruments in the balance sheet are comprised by framework agreements for

netting or other agreements. Assets and liabilities are offset when Alm. Brand Bank and the counterparty have a legally enforceable right to

offset the recognised amounts and subsequently realise the asset and settle the liability simultaneously. Alm. Brand Bank uses master netting

agreements, which entitle the group to further offset amounts when a counterparty is in default as the exposure to the counterparty in such a

case would be reduced because of collateral security received. Collateral security reduces the exposure if a counterparty is in default, but it does

not meet the criteria for offsetting in accordance with IFRS.

Gross

recognised

assets

Liabilities

offset in the

balance sheet

Gross

recognised

assets

Liabilities

offset in the

balance sheet

Financial

assets stated at

net amounts in

the balance

sheet



the balance sheet


70


OVERVIEWNOTES

Group

DKK '000 2015

Loans,

advances and

other

receivables

Liabilities at

amortised cost

Assets at fair

value classified

on initial

recognition

Management

activities Total

Interest receivable 234,950 - 58,823 - 293,773

Interest payable - 95,107 - - 95,107

Net interest income 234,950 -95,107 58,823 - 198,666

Dividend on shares, etc. - - 2,370 2,370

Fees and commissions received 56,278 - 12,571 144,531 213,380

Other fees and commissions paid 16,452 - 18 10,333 26,803

Net interest and fee income 274,776 -95,107 71,376 136,568 387,613

Value adjustments excluding

credit losses on mortgage deeds - -90 -30,599 - -30,689

Credit losses on mortgage deeds - - -73,919 - -73,919

Other operating income 188,930 - - - 188,930

Impairment of loans, advances

and receivables, etc. 253,211 - - - 253,211

Total 210,495 -95,197 -33,142 136,568 218,724

Group

DKK '000 2014

Loans,

advances and

other

receivables

Liabilities at

amortised cost

Assets at fair

value classified

on initial

recognition

Management

activities Total

Interest receivable 258,982 - 191,471 - 450,453

Interest payable - 216,063 - - 216,063

Net interest income 258,982 -216,063 191,471 - 234,390

Dividend on shares, etc. - - - 1,117 1,117

Fees and commissions received 47,298 - 2,230 124,696 174,224

Other fees and commissions paid 13,775 - 29 9,775 23,579

Net interest and fee income 292,505 -216,063 193,672 116,038 386,152

Value adjustments excluding

credit losses on mortgage deeds - -348 -25,316 - -25,664

Credit losses on mortgage deeds - - -136,669 - -136,669

Other operating income 143,865 - - - 143,865

Impairment of loans, advances

and receivables, etc. 140,742 - - - 140,742

Total 295,628 -216,411 31,687 116,038 226,942

Fee income from management activities amounted to DKK 85 million, and fee expenses from management activities amounted to DKK 5

million.

NOTE 42 Return on financial assets and liabilities

Fee income from management activities amounted to DKK 108 million, and fee expenses from management activities amounted to DKK 5

million.

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OVERVIEWNOTES

71

Group

DKK '000 2015 2014

NOTE 43 Fair value of financial instruments

Fair value

Recognised

value Fair value

Recognised

value

Assets at fair value classified on initial recognition

Loans, advances and other receivables at fair value 227,516 227,516 306,640 306,640

Assets at fair value held for trading:


Shares, etc. 214,422 214,422 236,294 236,294

Derivatives 35,021 35,021 27,137 27,137

Loans and receivables:

Cash in hand and demand deposits with central banks 262,281 198,496

Due from credit institutions and central banks 301,235 756,639

Loans, advances and other receivables at amortised cost 4,105,559 4,071,077 4,390,339 4,347,422

Other assets 38,384 83,401

Financial assets, year-end 8,536,908 9,104,326 12,161,032 13,156,651

Assets at fair value held for trading:

Derivatives 122,332 122,332 38,026 38,026

Financial liabilities measured at amortised cost:

Payables to credit institutions and central banks 359,367 1,199,258

Deposits and other payables 8,123,969 8,098,677 11,152,931 11,076,443

Other liabilities 20,703 73,038


Financial liabilities, year-end 8,429,513 8,776,079 11,382,822 12,561,765

The calculation of fair values is described in detail in note 47 Accounting policies for items measured at fair value.

Loans, advances and other receivables at fair value, bonds at fair value, shares etc. and derivative financial instruments are measured at fair value

in the financial statements in order that recognised values equal fair values.

The difference between fair values and recognised values of loans, advances and other receivables at amortised cost is assumed to equal the

interest rate level-independent value adjustment calculated by comparing current market rates with the market rates prevailing when the loans

were raised. Changes in the credit quality are not taken into account as such changes are assumed to be included in impairment writedowns for

both recognised values and fair values.

The fair value of deposits and other payables is assumed to equal the interest rate level-independent value adjustment calculated by comparing

current market rates with the market rates prevailing when the deposits were established.

Subordinated debt is measured at amortised cost. The difference relative to fair values is assumed to be the interest rate level-independent value

adjustment calculated by comparing current market rates with the market rates prevailing when the issues were made. Changes in fair values due

to changes in the bank’s own credit rating are not taken into account.

Fair value adjustment of financial assets and liabilities indicates a total unrecognised, unrealised gain of DKK 1 million at 31 December 2015

(2014: DKK 50 million loss), which can be attributed to lower interest rates on the underlying assets and liabilities relative to the level of interest

rates at year-end. This adjustment was attributable to loans and advances, deposits and other payables and subordinated debt.

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72


OVERVIEWNOTES

DKK '000

Net Total Total Net Total Total

income assets liabilities income assets liabilities

2015 2015 2015 2014 2014 2014

Associates (not consolidated):

Nordic Corporate Investments A/S (Copenhagen) - - - 12,055 156,075 26,439

Cibor Invest A/S Aarhus (stake 42,6 %) 1,004 180,308 138,412 1,538 167,002 113,589

Nordic Corporate Investments A/S was sold in May 2015.

Share- Share-

Share holders' Profit for Share holders' Profit for

capital equity the year capital equity the year

2015 2015 2015 2014 2014 2014

Consolidated subsidiaries:

Alm. Brand Leasing A/S (Copenhagen) 3,000 134,784 11,282 3,000 73,502 8,861

Alm. Brand Formue A/S (Copenhagen) - 21,304

Ejendomsselskabet af 16. marts 2010 ApS (Copenhagen) 80 -19,799 -3,971 80 -15,828 -898

K/S Juventusvej (Copenhagen) - 16,652 5,213 - 11,438 7,659

Juventusvej Komplementar ApS (Copenhagen) 125 25 21 125 -26 -13

Associated companys:

Nordic Corporate Investment A/S

(Copenhagen) - - - 96,969 129,636 7,832

Cibor Invest A/S (Århus) 35,000 41,896 199 45,000 51,696 1,025

Directorships

Company (registered office) Employees of Alm. Brand Bank, who are board members

Alm. Brand Leasing A/S (Copenhagen) Managing Director Kim Bai Wadstrøm

Director Jacques Skovgaard-Sørensen

Director Michael Iversen

Director Søren Olling

K/S Juventusvej (Copenhagen) Head of Section Bjarne Rasmussen

Head of Section Michael Lammers

Name and municipality of registered office of group enterprises in which employees of the bank hold offices:

NOTE 44 Group overview

The bank has issued a letter of comfort to K/S Juventusvej and Juventusvej Komplementar ApS and guarantees the continued operations of these

companies.


NOTER

73


OVERVIEWNOTES

Capital managementCapital management is based on two key business objec-tives:

• Having solid capital strength which supports the statutory requirements

• Generating a return on average shareholders’ equity for the forward-looking bank of the money market rate plus 10%

As a result, Alm. Brand Bank has defined capital targets which provide an additional buffer relative to the solvency requirements for its capital.

The individual capital targets are described in detail in the management’s review. The capital target reflects manage-ment’s intention that the bank’s capital resources should be sufficiently robust to be able to absorb a number of exter-nal events or strong adverse developments in the financial markets.

If Alm. Brand has total capital equivalent to the defined cap-ital targets, management believes that the three objectives mentioned above will have been met.

The total capital may consist of shareholders’ equity and tier 2 capital. The aim is for equity to constitute most of the total capital.

Risk managementManaging the group’s risk exposure is a key management priority because uncontrolled developments in different risks may have a substantial impact on financial performance and capitalisation and, by extension, on the future business potential.

The purpose of the risk management function of Alm. Brand Bank and the Alm. Brand Group in general is to ensure ongoing, proactive risk management in day-to-day activities based on common sense. This imposes a duty on the risk management function to ensure that the necessary report-ing is available in order for the business to make sound and informed decisions. The reporting and sparring process is aligned to the specific business areas in order to make risk management relevant for the business and, hence, for the customers. The decentralised entities in Alm. Brand’s risk management system include the credit secretariat dealing with the bank’s credit risks, a special committee dealing with IT-related risks and Risk Management dealing with market risk and capital management for the group. In other words, the risk management structure is decentralised with respect to principal business risks with overall risk management being monitored at group level.

The Board of Directors defines and approves the company’s overall policy for assuming risk and sets up the overall risk guidelines as well as the reporting requirements. Forming the basis of the Board of Directors’ review of the bank’s business model and related policies for each individual business area, the Board of Directors receives an overall risk report. On this basis, the Management Board determines the operational risk management.

The statutory audit committee of Alm. Brand Bank provides risk and capital management support to the Board of Direc-tors and other bodies. The audit committee comprises three members of the Board of Directors.

The group’s central risk forum is a group risk committee, the objective of which is to ensure coordination and uniformity in the group companies with respect to accepting, calcu-lating and reporting risk. In addition, a group investment committee ensures that the group’s investments and market risks are within the limits defined by the boards of directors and the policies of the individual companies.

The compliance function assists management in ensuring that the companies’ methods and procedures are adequate to ensure compliance with the legislation and rules in force from time to time as well as ethical standards. The internal audit department oversees the administrative and financial reporting procedures, control procedures and compliance with management’s policies and guidelines.

In addition, a forum for operational risk collates information about operational events in Alm. Brand Bank. Participating in this forum are Risk Management, Compliance and Internal Audit. Moreover, the group has set up an approval commit-tee for financial products. This committee is responsible for ensuring that business procedures, processing routines, etc. are in place before new products or activities are imple-mented, thereby helping to mitigate operational risk.

Credit riskCredit risk is the risk of incurring a financial loss due to default on counterparties’ payment obligations. Credit risk includes losses/impairment writedowns on loans, guaran-tees, derivatives, etc., concentration risk on customer types, exposure types, collateral types, etc., a general change in credit quality due to changes in legislation, economic condi-tions, market practices and conditions, etc.

The bank’s future lending strategy is directed at private customers. As a result, Alm. Brand Bank mainly grants loans to private customers, investment credit facilities in Financial Markets and leasing in the subsidiary Alm. Brand Leasing.

NOTE 45 RISK MANAGEMENT

74


OVERVIEWNOTES

The bank still holds mortgage deeds and credit exposures with commercial and agricultural customers as counter-parties, but this part of the business will be phased out in the years ahead. The mortgage deed portfolio was strongly reduced in connection with the sale of most of the mortgage deeds to Alm. Brand Forsikring A/S in December 2014. The related option agreement means that the bank retains the credit risk attaching to the original mortgage deed portfolio.

Once a year, the bank’s Board of Directors reviews and approves the credit policy and the associated guidelines describing the rules governing the bank’s loan granting, pro-vision of guarantees and other credit risks. The guidelines contain specific limits for the individual products offered by the bank and the customer segments buying the bank’s credit products.

The bank’s credit rating of private customers seeking loans is based on a review of the customers’ overall financial situ-ation, including disposable amount, assets and level of debt. Secondarily, the bank uses credit scoring models which have been developed over a number of years. The models are still being developed and improved on the basis of recent experi-ence and changes in market conditions.

Alm. Brand Bank uses an authorisation control system for private customers. In combination with the bank’s credit application and approval system, this system ensures that the approvals made by individual managers and employees are consistent with their lines. The system also supports regular collection of financial infor-mation on individual customers. This information is included in the overall decision-making basis for credit segmentation of the customer.

In the winding-up portfolio, loans are granted only for cred-it-defence purposes when this is deemed to minimise the bank’s risk of loss.

As part of the control environment, an independent cred-it control function has been established, which has been charged with the task of making spot checks to identify any potential process shortcomings.

Market riskThe bank regularly takes positions in the financial markets for the account of customers as well as for its own account. The financial positions may involve different types of market risk. Active risk management is applied across the bank in order to balance out financial risks on assets and liabilities

with the aim of achieving a satisfactory return that matches the bank’s risk tolerance and applied capital. The bank’s risk management uses derivative financial instruments to adjust the market risk.

Interest rate riskThe asset allocation of Alm. Brand Bank did not change significantly in 2015, and mortgage bonds still represent the majority of the investment assets. Spread risk is adjusted through an overall limit on various types such as countries and credit classes.

In the event of a 1 percentage point spread widening, the banking group’s equity and results will be adversely affected by DKK 146 million.

The Board of Directors of Alm. Brand Bank has defined limits for interest rate risk within and outside the trading portfolio. The bank’s interest rate risk in the trading portfolio is derived from the portfolio of bonds and other financial instruments and from trading on behalf of customers. There are limits for both the overall interest rate risk and the distribution thereof on the yield curve. Most of the bank’s interest rate exposure is to Danish kroner. Alm. Brand Bank seeks to minimise interest rate risk in currencies other than DKK and EUR. The bank’s interest rate risk outside the trading portfolio is de-rived exclusively from the portfolio of mortgage deeds.

In the event of a 1 percentage point increase in interest rates on the total interest-bearing portfolio, the banking group’s equity and results will be adversely affected by DKK 5 million.

Currency riskThe banking group’s daily currency risk is calculated and managed on the basis of the greater of the sum of receiv-ables and the sum of payables denominated in foreign currency translated into Danish kroner. This corresponds to exchange rate indicator 1. See note 34.

The bank’s loans are primarily denominated in Danish kroner and are therefore not subject to currency risk to any sig-nificant extent. The investment strategy stipulates that the bank may hold active positions in foreign currency within given limits. An active position means that it is possible to purchase foreign currency without having any obligation to do so and may sell foreign currencies which are not part of the portfolio. Derivative financial instruments are used to manage currency risk.

NOTE 45 RISK MANAGEMENT - CONTINUED

75


OVERVIEWNOTES

Equity riskEquities in the trading portfolio, amounting to DKK 15 mil-lion, are held with a view to trading on behalf of customers or as part of the bank’s investment portfolio. The bank’s trading portfolio consists of positions in listed Nordic equities and unit trust certificates held with a view to supporting the bank’s markets and asset management functions.

The bank’s portfolio of equities outside the trading portfolio comprises equities taken over for credit-defence purposes. The portfolio also comprises sector equities intended to sup-port the bank’s operations. Participation in sector companies is deemed necessary, and the bank does not expect to sell these equities, which are therefore recognised outside the trading portfolio. Most of the sector equities are unlisted.

In the event of a 12% decline on the total portfolio of eq-uities within and outside the trading portfolio, the banking group’s equity and results will be adversely affected by DKK 27 million.

Property riskThe bank does not want to hold properties but has in recent years taken over single-family houses and rental property for credit-defence purposes. In 2015, the bank significantly reduced its property portfolio, and the exposure to proper-ties is therefore assessed to be limited relative to the bank’s total assets. A 1 percentage point increase in the return requirement on rental property and a 15% reduction of the valuation of single-family houses would impact the banking group’s equity and financial results adversely by DKK 18 million.

Counterparty riskThe bank’s financial counterparties arise mainly through placement of cash funds with other banks and bilateral derivative agreements. Based on an individual assessment, exposure limits are defined for each individual counterparty.

The bank reduces its exposure by means of margin agree-ments and netting with the relevant counterparties. Margin agreements ensure that a counterparty provides collater-al when the exposure exceeds a certain level. The way in which this collateral is managed is described in detail in a framework agreement or in the form of an ISDA Credit Support Annex to an ISDA Master Agreement. Netting is also described in the framework agreements or in the ISDA Master Agreements and means that gains and losses on derivative financial instruments may be offset if the counter-party breaches its obligations.

LiquidityThe banking group aims to ensure that liquidity is at all times sufficient to support its future operations and comply with the statutory requirements, including the guideposts of the Danish FSA’s Supervisory Diamond. Compliance with the bank’s liquidity target is ensured through the internal-ly defined limits for the composition of funding, including funding sources and their repayment structure as well as requirements for the size of the bank’s liquidity reserve. The bank determines its liquidity management on the basis of a prudent risk profile. The bank manages and monitors liquidi-ty on a day-to-day basis based on short-term and long-term liquidity requirements.

The short-term liquidity management is intended to ensure that Alm. Brand Bank complies with the statutory require-ments at all times. This is achieved partly by neutralising imminent liquidity effects, thereby maintaining liquidity within the limits defined by the Board of Directors, and part-ly by securing financial resources in the form of certificates of deposit and undrawn money market lines with major market players. The bank has also established a set-up for repo transactions and the possibility of selling the cash portfolio.

The long-term liquidity management is intended to ensure that Alm. Brand Bank does not find itself in a situation where the cost of funding the bank’s operations becomes disproportionately high. Deposits are the primary funding source. Consequently, the financial liabilities have a shorter average duration than the assets. See note 32. This liquidity profile should be seen in light of bank’s ongoing reduction of lending in the winding-up segment. This reduces the longer receivables, whereby it is an advantage to be able to adjust funding relatively quickly.

The bank’s funding is composed primarily of deposits held at call and secondarily of deposits subject to term of notice, but the proportion of deposits subject to term of notice declined in 2015, which was in line with the funding strategy. There is no need to increase the external funding through other sources.

The new liquidity ratio (Liquidity Coverage Ratio) took effect from 1 October 2015. This ratio shows the degree to which the bank is able to cover its cash outflows over the next 30 days without access to market funding. At 31 Decem-ber 2015, 80% of the liabilities falling due over the next 30 days must be covered by highly liquid assets. Of these, 30% must be cash or cash equivalents, government bonds or the like. When the rules have been fully phased in by 2018, the coverage must be 100%. At 31 December 2015, Alm. Brand Bank’s LCR was 382.


76


OVERVIEWNOTES

Other risksAlm. Brand Bank’s operational risks, i.e. costs associated with operational errors, are assessed on an ongoing basis. The group has a number of control procedures in the form of work routines, business procedures and reconciliation processes, performed locally and centrally throughout the organisation. The extent of control measures is balanced against the expenses they involve. Security measures are assessed relative to potential threats and their assessed probability of occurrence as well as the potential business consequences, should such threats materialise.

Reputational risks are costs associated with having a poor public reputation. This affects the group’s ability to main-tain and develop its business volume. A reputation arises through media coverage of the group or incidents in relation to the group, for instance in news media and/or on social media. The group has drawn up media contingency plans to handle any incidents that could lead to unfavourable media coverage.

Strategic risks have an adverse effect on earnings or capital requirements. They arise due to inexpedient business deci-sions, insufficient implementation of business initiatives or slow response to the challenges facing the group.

Strategic risks cannot be avoided but they can be limited by maintaining high professional standards, openness and will-ingness to change in the organisation. Alm. Brand’s strategy has been prepared by the group management on the basis of a structured process and in cooperation with each group subsidiary’s board of directors, management board and managerial groups.

Additional information about the bank’s risk managementAdditional information about the bank’s risk management is provided on the bank’s website almbrand.dk/risiko, which contains a description of the group’s risk profile and risk management.


77


OVERVIEWNOTES

http://www.almbrand.dk/abdk/English/InvestorPress/RiskandCapitalManagement/index.htm

NOTE 46 SIGNIFICANT ACCOUNTING ESTIMATES, ASSUMPTIONS AND UNCERTAINTIES

The preparation of the financial statements involves the use of accounting estimates. Such estimates are made by the company’s management in accordance with the ac-counting policies and on the basis of historical experience and assumptions, which management considers prudent and realistic but which are inherently uncertain and unpre-dictable.

The most significant estimates are related to the valuation of loans, advances and other receivables at amortised cost and the loss option to hedge the credit risk on the mort-gage deeds sold to Alm. Brand Forsikring A/S in December 2014. In addition, significant estimates have been applied in the recognition and measurement of deferred tax assets.

This note should be read in conjunction with note 40, which contains information about the determination of fair value.

Loans, advances and other receivables at amortised costIn respect of individual impairment of loans, significant estimates have been applied in quantifying the risk that not all future payments will be received, including esti-mates related to determining whether a customer should be marked for objective evidence of impairment. If it can be determined that not all future payments will be re-ceived, the determination of the amount of the expected payments, including realisation values of any collateral and expected dividend payments from estates, involves signifi-cant estimates. Adverse and unforeseen economic developments may affect the payment ability of individual customers. For in-stance, major interest rate changes, failure to let premises and changes in settlement prices for agricultural products may affect the customers’ ability to pay and the value of the collateral security on which the calculation of the bank’s collateral security is based. In particular, lending for activities within financing of real property and agriculture may be adversely affected.

Collective impairment charges are made on the basis of a model developed by the Association of Local Banks in Den-mark. If the model does not sufficiently take into account all matters regarding the bank’s loan portfolio, it will be

supplemented by a management estimate. The manage-ment estimate hence reflects the effect of expectations for the development in the credit risk in selected segments.

In addition, changes are regularly made to the rules that form the basis of the calculation of impairment writedown and provisioning requirement in the bank. Changes that are subsequently introduced may trigger higher impair-ment writedowns and provisions, regardless of the fact that no events would seem to have occurred in relation to the customers’ ability to pay or collateral that would warrant such higher impairment writedowns.

Valuation of loss optionIn December 2014, the bank sold DKK 1.9 billion of its mortgage deed portfolio to Alm Brand Forsikring A/S. Concurrently with the sale, an option agreement was concluded to protect Alm. Brand Forsikring against future credit losses. This means that Alm. Brand Forsikring can deliver back mortgage deeds to the bank when certain default criteria have been met, including failure to service the mortgage deed, death of the debtor, forced sale, etc. The valuation of the loss option is based primarily on the risk of default and the loss incurred in the event of de-fault. Any unsecured part is written down and will depend, among other things, on how long the mortgage deed has been delinquent. However, the unsecured part must be written down to zero after the mortgage deed has been delinquent for a period of 180 days. In the calculation of any unsecured part, the valuation of property values builds on a significant estimate, which is made on the basis of an individual external valuation for large properties and the official property valuation for other properties.

Deferred tax assets The full amount of the bank’s deferred tax asset was rec-ognised in the balance sheet in 2015. The amount of the bank’s deferred tax asset is assessed on the basis of ex-pectations for the future earnings of the Alm. Brand Group. As Alm. Brand Bank is taxed jointly in Denmark with the other group companies, the utilisation of the deferred tax asset depends on the results of the Alm. Brand Group as a whole. The current tax asset is expected to be utilised within the next five years.

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OVERVIEWNOTES

NOTE 47 ACCOUNTING POLICIES

GeneralThe consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as approved by the EU. The parent company financial statements have been prepared in accordance with the provisions of the Danish Financial Business Act, including the Executive Order on financial reports presented by credit institutions and investment companies. In addition, the consolidated financial statements are presented in accordance with additional Danish disclosure requirements for the annual reports of listed financial enterprises.

Additional Danish disclosure requirements for annual reports are for the group set out in the Danish Statutory Order on Adoption of IFRS for financial enterprises issued pursuant to the Danish Financial Business Act and by NASDAQ OMX Copenhagen A/S.

The annual financial statements are presented in Danish kroner (DKK), which is considered the primary currency of the group’s activities and the functional currency of the parent company.

The subsidiary Alm. Brand Formue A/S entered into solvent liquidation in March 2014, and liquidation of the company was finalised in the third quarter of 2014. In compliance with IFRS 5, the income statement includes a separate line item called discontinued activities. This item comprises the results of Alm. Brand Formue, the results of equity risk hedging in the company, the bank’s trading income relating to Alm. Brand Formue and interest on loans provided to Alm. Brand Formue. See note 9 to the financial statements for additional information.

The requirement concerning a sale within 12 months accord-ing to IFRS 5 is not met for the business area Winding-up activities. Consequently, a division on continuing and discon-tinued activities has not been used.

The accounting policies applied in the consolidated financial statements are described below and are otherwise un-changed from 2014.

In order to provide a better overview and reduce the num-ber of note disclosures, the amount and qualitative informa-tion of which are insignificant, certain disclosures have been omitted.

The accounting policies of the parent company on recogni-tion and measurement are in accordance with the account-

ing policies of the group. See also the separate section below on the accounting policies of the parent company.

Implementation of new and amended standards and interpretationsThe Annual Report 2015 is presented in accordance with the new and amended standards (IFRS/IAS) and interpretations (IFRIC) which apply for financial years starting on or after 1 January 2015.

The implementation of new and amended standards and interpretations did not have any effect on the profit for the year, other comprehensive income, total assets or share-holders’ equity and did not result in changes to the pres-entation or note disclosures either.

Standards and interpretations not yet in forceAt the date of publication of these financial statements, a number of new or amended standards have not yet en-tered into force and/or been adopted for use in the EU and are therefore not included in these financial statements. Standards expected to have a material effect include IFRS 9, Financial Instruments, which concerns the accounting treatment of financial assets, including in relation to classifi-cation, measurement, hedge accounting and impairment.

IFRS 9 changes the classification of financial assets to the effect that classification depends on the entity’s business model for managing the asset and the cash flows generated by the asset.

Following the implementation of IFRS 9, financial assets must be classified as belonging to one of the following four categories:

1. Amortised cost2. Fair value through profit or loss (FVTPL)3. Fair value through other comprehensive income (FVTOCI) (liabilities)4. Fair value through other comprehensive income (FVTOCI) (equity instruments) The majority of the provisions of IAS 39 on recognition and measurement of financial liabilities are unchanged in IFRS 9.

The derecognition provisions of IAS 39 are unchanged in IFRS 9.

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The provisions of IFRS 9 concerning impairment of financial assets are based on an expected loss model as opposed to the current rules of IAS 39, which are based on the incurred loss model.

Under IFRS 9, impairment of financial assets must be calcu-lated on a regular basis from initial recognition at an amount equal to:

• Lifetime expected losses weighted by the probability that the borrower defaults within the next 12 months; or

• Lifetime expected losses when the financial asset’s credit risk has significantly increased since initial recognition of the asset

IFRS 9 also increases the disclosure requirements by means of consequential amendments to IFRS 7, for instance concerning hedge accounting, credit risk and calculation of provisions for bad debts. The standard comes into force for financial years starting on or after 1 January 2018. The standard has not yet been adopted for use in the EU.

In January 2016, the IASB issued IFRS 16, Leases. IFRS 16, which replaces IAS 17, Leases, will only imply insignif-icant changes to the accounting treatment for lessors. For lessees, the accounting treatment will change significantly as all leases will generally be recognised in the balance sheet. IFRS 16, which has not yet been adopted by the EU, is effective from 1 January 2019.

Management believes that, except for the implementation of IFRS 9 and IFRS 16, the effect of which has not been investigated in connection with the preparation of the annual report, the implementation of new and amended standards will only have a minor impact on the annual report.

Basis of consolidationThe Alm. Brand Bank Group has decided to prepare and publish consolidated financial statements, notwithstanding that the banking group is included in the consolidated finan-cial statements of a higher-ranking parent company.

The consolidated financial statements comprise the parent company, Alm. Brand Bank A/S, and group enterprises in which the parent company directly or indirectly exercises a controlling influence. Companies in which the group holds between 20% and 50% of the voting rights or otherwise exercises a significant but not a controlling influence are considered associates.

The consolidated financial statements have been prepared on the basis of the financial statements of Alm. Brand Bank and its subsidiaries by consolidating items of a similar nature and eliminating intra-group income and expenses, in-tra-group accounts and gains and losses on transactions be-tween the consolidated companies. The financial statements used for consolidation have been prepared or restated in accordance with the group’s accounting policies.

Parent company investments in consolidated subsidiaries are offset by the parent company’s proportionate share of the equity value of the subsidiaries.

The proportionate shares of the results and equity of sub-sidiaries attributable to minority interests are measured and recognised as an integral part of the income statement and the balance sheet. The share of the results attributable to minority interests is shown as the group’s profit allocation.

Intra-group services are settled on market terms or on a cost recovery basis. Intra-group accounts carry interest on market terms. Intra-group transactions in securities and other assets are settled at market prices.

The consolidated financial statements of Alm. Brand Bank are a component of the consolidated financial statements of Alm. Brand A/S and Alm. Brand af 1792 fmba.

General recognition and measurement policiesIncome is recognised in the income statement as earned. This includes the recognition of value adjustments of financial assets and liabilities. Costs incurred to generate the year’s income are recognised in the income statement. Assets are recognised in the balance sheet when, due to a previous event, it is probable that future economic bene-fits will flow to the group and the value of the asset can be reliably measured. Liabilities are recognised in the balance sheet when, due to a previous event, it is probable that future economic benefits will flow from the group and the value of the liability can be reliably measured.

Recognition and measurement take into account predictable losses and risks occurring before the presentation of the financial statements which confirm or invalidate affairs and conditions existing at the balance sheet date.

Otherwise, assets and liabilities are recognised and meas-ured as described for each individual item below.

In connection with the acquisition or sale of financial assets and liabilities, the settlement date is used as the recognition

NOTE 47 ACCOUNTING POLICIES - CONTINUED

NOTER

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date. Changes to the value of the asset acquired or sold during the period from the transaction date to the settle-ment date are recognised in the income statement. If the acquired item is measured at cost or amortised cost after initial recognition, any value changes during the period from the transaction date to the settlement date are not recog-nised.

Certain financial assets and liabilities are measured at am-ortised cost, implying the recognition of a constant effective rate of interest to maturity. Amortised cost is stated as orig-inal cost less any principal payments and plus or minus the accumulated amortisation of any difference between cost and the nominal amount. This method allocates capital gains and losses over the term to maturity.

At initial recognition, financial assets are divided into the following categories:

• Financial assets at fair value through profit or loss• Loans and receivables measured at amortised cost

At initial recognition, financial liabilities are divided into the following categories:

• Financial liabilities at fair value through profit or loss• Other financial liabilities measured at amortised cost

Below is a description of the accounting policies applied to financial assets and liabilities as well as other items.

Foreign currencyTransactions in foreign currency are translated into the functional currency at the exchange rate prevailing at the transaction date. Gains and losses on exchange differences arising between the transaction date and the settlement date are recognised in the income statement.

Monetary assets and liabilities in foreign currency are trans-lated at the exchange rates prevailing at the balance sheet date. Exchange rate adjustments of monetary assets and liabilities arising as a result of differences in the exchange rates prevailing at the transaction date and at the balance sheet date are recognised in the income statement.

Non-monetary assets and liabilities in foreign currency that are subsequently revalued at fair value are translated at the exchange rates prevailing at the date of revaluation. Exchange rate adjustments are included in the fair value ad-justment of the asset or liability. Other non-monetary items

in foreign currency are translated at the exchange rates prevailing at the date of transaction.

TaxCalculated current and deferred tax on the profit for the year and adjustments of tax charges for previous years are recognised in the income statement. Income tax for the year is recognised in the income statement on the basis of the tax regulations applying to the individual companies.

Current tax assets and liabilities are recognised in the balance sheet at the amount that can be calculated on the basis of the expected taxable income for the year. Current tax assets and liabilities are shown as net amounts to the extent that the amounts can legally be offset against each other and the items are expected to be settled net or simul-taneously.

Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amount and the tax value of assets and liabilities. Deferred tax is measured on the basis of the tax regulations and rates that, according to the rules in force at the balance sheet date, will apply at the time the deferred tax is expected to crystallise as current tax.

Deferred tax assets, including the tax base of tax losses car-ried forward, are measured at the amount at which they are expected to be realised, either as a set-off against tax on future income or as a set-off against deferred tax liabilities.

Deferred tax assets and liabilities are offset within the same legal tax unit.

Income statement itemsInterest receivable comprises interest and interest-like income, while interest payable comprises interest and interest-like expenses. Interest-like income and expenses comprise fees and commissions that are an integral part of the effective rate of interest. Interest income and expenses also include interest on financial instruments at fair value.

Interest income and expenses in respect of interest-bear-ing financial instruments measured at amortised cost are recognised in the income statement applying the effective interest method based on the cost of the financial instru-ment. Interest includes amortisation of fees which are part of the effective yield of the financial instrument, including origination fees, and amortisation of any additional differ-ence between cost and redemption price.


81


OVERVIEWNOTES

Recognition of interest on loans and advances is based on the value of loans and advances after impairment.

Dividend on shares, etc. comprises dividends and similar income from equity investments and is recognised when the shareholders have approved the dividend distribution. For associates, however, dividend received is offset against the value adjustment made at equity value.

Fees and commission income comprise income relating to services at the expense of the customers, while fees and commissions payable include expenses concerning manage-ment fees, etc.

Value adjustments comprise value adjustments of assets and liabilities measured at fair value. The item also includes exchange rate adjustments.

Other operating income includes leasing income from oper-ating leases, proceeds from the sale of lease assets, income relating to assets held temporarily, proceeds from the sale of tangible assets, as well as income from the sale of infor-mation services.

Staff costs and administrative expenses comprise remuner-ation for the Management Board and the Board of Directors and staff costs and other administrative expenses.

The group offers defined contribution plans with the ma-jority of its employees, under which the group pays fixed contributions into the employees’ pension plans with their pension companies. Expenses for pension contributions are recognised in the income statement in the period in which the contributions are earned. The group has no obligations to pay additional contributions. There are no defined benefit plans in the group.

Other operating expenses comprise guarantee commission to Finansiel Stabilitet A/S and costs relating to assets held temporarily. This item also includes value adjustment of assets held temporarily.

Impairment of loans, advances and receivables, etc. com-prises impairment of items that involve a credit risk and pro-visions for guarantees. See also under accounting policies for balance sheet items.

Profit/loss from investments in associates comprises the share of the net profit or loss of associates.

Balance sheet itemsCash in hand and balances at call with central banks and balances due from credit institutions and central banks are measured at fair value on initial recognition and subsequent-ly at amortised cost. Balances due from credit institutions and central banks include all receivables from credit institu-tions and central banks, including receivables in connection with genuine purchase and resale transactions.

Loans, advances and other receivables at fair value com-prise mortgage deeds measured at fair value on initial and subsequent recognition. The calculation of the fair value of mortgage deeds is based on a credit model and a market value model, respectively.

The market value model is used for the valuation of mort-gage deeds not in default. The model builds on a number of assumptions in relation to required rate of return, expect-ed credit losses and repayments. The model revalues the mortgage deed at a value above the nominal amount of the residual debt if the mortgage deed coupon is higher than the discount rate less expected credit losses.

Mortgage deeds that meet certain default criteria, including delinquency, death of the debtor and forced sale, are valued on the basis of the credit model. Any unsecured part is writ-ten down when the default criterion materialises. However, in the event of delinquency, the impairment writedown will be made over a period of time, always provided that any unsecured part must be written down to zero after the mort-gage deed has been delinquent for a period of 180 days.

Loans, advances and other receivables at amortised cost comprise all types of loans and advances, including receiv-ables from finance leases, measured at amortised cost. Loans, advances and other receivables at amortised cost are measured on initial recognition at fair value plus transaction costs less fees and commissions received that are directly related to the acquisition or issue of the financial instru-ment. Subsequently, loans, advances and receivables are measured at amortised cost using the effective interest method.

An ongoing evaluation takes place to detect any objective evidence of impairment of loans, advances and other receiv-ables determined at amortised cost. If there is any objective evidence of impairment, an individual impairment writedown will be made on the loan or receivable corresponding to the difference between the carrying amount before the impair-ment and the net present value of expected future pay-ments from the loan, advance or receivable if it is deemed


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OVERVIEWNOTES

that the debtor is able to make payments in addition to cash flows from the assets provided as collateral for the loan. A realisation principle is used if the debtor is not deemed to be able to make payments in addition to cash flows from the assets provided as collateral for the loan.

Loans, advances and receivables that are not written down individually are subject to a collective assessment of wheth-er there is any evidence of impairment for the group as a whole. A collective assessment involves groups of loans, advances and receivables with uniform credit risk character-istics.

The collective assessment is based on a segmentation model developed by the Association of Local Banks in Denmark, which is responsible for the ongoing maintenance and devel-opment of the model. The segmentation model determines the correlation in the individual groups between actual losses and a number of significant explanatory macroeco-nomic variables by way of a linear regression analysis. The explanatory macroeconomic variables include unemploy-ment, house prices, interest rates, number of bankruptcies/forced sales, etc.

The macroeconomic segmentation model is generally calculated on the basis of loss data for the entire banking sector. The bank has therefore assessed whether the model estimates reflect the bank’s portfolio of loans and advances.

This assessment has entailed an adjustment of the mod-el estimates to the bank’s own circumstances, and these adjusted estimates form the basis of the calculation of col-lective impairment charges. An estimate has been calculated for each individual group of loans, advances and receivables, which expresses the percentage impairment of the specific group of loans, advances and receivables at the balance sheet date. The individual loans and advances’ impact on collective impairment charges is calculated by comparing the actual risk of loss of the individual loans and advances with the original risk of loss of such loans and advances and the risk of loss of the loans and advances at the beginning of the current reporting period. The impairment is calculat-ed as the difference between the carrying amount and the discounted value of the expected future payments.

The model-based calculation of collective impairment charg-es is supplemented by a management estimate where man-agement finds that there are factors which the model does not sufficiently take into account. The management estimate hence reflects the effect of expectations for the development in credit risk in selected segments.

Bonds at fair value comprise listed bonds for which the price is fixed in active markets. Bonds at fair value are measured at fair value on initial and subsequent recognition. The fair value of listed bonds is determined based on the closing price at the balance sheet date, or in the absence of a clos-ing price, another public price deemed to be most similar thereto. However, the fair value of drawn listed bonds is calculated as the net present value of the bonds.

Shares, etc. comprise listed equity investments and other unlisted equity investments. Shares, etc. are measured at fair value at initial and subsequent recognition. The fair val-ue of listed equity investments is determined based on the closing price at the balance sheet date, or in the absence of a closing price, another public price deemed to be most similar thereto. The fair value of unlisted equity investments is determined as the transaction price that would result from a transaction between independent parties. If the fair value cannot be reliably measured, unlisted equity investments will be measured at cost less any impairment.

Investments in associates are measured according to the equity method, implying that the investments are measured at the proportionate ownership interest of the equity value of the associates at the balance sheet date.

Other property, plant and equipment comprises operating equipment, furniture and fittings and operating leases, which are measured at the lower of cost less accumulated depreciation and impairment charges and the recoverable amount. Depreciation is carried out on a straight-line basis with due consideration of the expected residual value over the expected useful life of the assets, which is expected to be up to five years.

Assets held temporarily comprise properties and cars only temporarily in the company’s possession and awaiting sale within 12 months and where a sale is very probable. The item is measured at the lower of the carrying amount and the fair value less expected costs to sell.

Investment property comprises single-family houses and rental property originally classified as assets held tempo-rarily, but which are no longer expected to be sold within 12 months. Properties are recognised at fair value through profit or loss in value adjustments. Single-family houses are measured on the basis of valuations received from external appraisers, who will include knowledge of the local area and actual prices obtained for comparable properties in their valuation. Rental property is measured on the basis of a cash flow model that takes into account a return require-ment which is dependent on location, financial strength of


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OVERVIEWNOTES

tenants, lease terms and use, etc. Rental property is sup-plemented by valuations received from external appraisers if the property is deemed to be difficult to sell.

Other assets comprise the positive fair value of spot trans-actions and derivatives and income that does not fall due for payment until after the end of the financial year, including interest receivable and dividend receivable.

Forward transactions, futures, swaps, options and unsettled spot transactions are measured at fair value on initial and subsequent recognition. Positive and negative fair values of derivatives are recognised as other assets or other liabilities, respectively. Changes in the fair value of derivatives are recognised in the income statement.

The issued loss option for coverage of credit losses on mort-gage deeds sold to Alm. Brand Forsikring A/S in December 2014 is valued using the credit model, which is also used for the valuation of the bank’s other mortgage deeds in default. The received option premium is included in value adjust-ments and recognised on an ongoing basis.

Prepayments comprise expenses incurred prior to the balance sheet date but which relate to a subsequent ac-counting period, including prepaid salaries, commission and interest.

Payables to credit institutions and central banks comprise obligations in connection with genuine sale and repurchase transactions and receivable margins in connection with futures and option transactions. Payables to credit institu-tions and central banks are measured at fair value on initial recognition and subsequently at amortised cost.

Deposits and other payables comprise all deposits, including obligations in connection with genuine sale and repurchase transactions with counterparties which are not credit insti-tutions or central banks and customers’ receivable margins in connection with futures and option transactions if the customer is not a credit institution. Deposits and other pay-ables are measured at fair value on initial recognition and subsequently at amortised cost.

Liabilities temporarily acquired comprise liabilities acquired in connection with assets held temporarily and measured at amortised cost.

Other liabilities comprise the negative fair value of spot transactions and derivatives and expenses that do not fall due for payment until after the end of the financial year, including interest payable.

Deferred income comprises income received prior to the balance sheet date but which relates to a subsequent ac-counting period, including interest and commission received in advance.

Provisions include liabilities which are uncertain with re-spect to size or time of settlement when it is likely that the obligation will require an outflow of the company’s financial resources, and the obligation can be measured reliably.

Provisions for pensions and similar obligations comprise jubilee benefits, etc. to employees, notwithstanding that the future benefit is subject to the individual being employed by the company at the time of the benefit. The value of the future benefits is measured as the net present value of the benefits expected to be paid based on a best estimate.

Provisions for losses on guarantees are measured at the best estimate of the costs necessary to meet the relevant obligation at the balance sheet date.

Subordinated debt comprises liabilities which, in the case of liquidation or bankruptcy and pursuant to the loan condi-tions, cannot be settled until any other creditor claims have been honoured.

Subordinated debt is initially measured at fair value, equal-ling the payment received less directly attributable costs incurred. Subsequently, subordinated debt is measured at amortised cost using the effective interest method.

Dividends are recognised as a liability in the financial state-ments at the time of adoption by the shareholders at the annual general meeting. Proposed dividends in respect of the financial year are stated as a separate line item in the statement of changes in equity.

Purchases and sales of treasury shares are recognised as a change in shareholders’ equity under other reserves.

Repo/reverse transactionsSecurities sold under agreements to repurchase at a later date (repo transactions) remain in the balance sheet. Amounts received are recognised as amounts owed to the counterparty, and interest is accrued. The securities are measured as if they were still recognised in the balance sheet, and market value adjustments and interest etc. are recognised in the income statement.

Securities purchased under agreements to resell at a later date (reverse transactions) are not recognised in the bal-


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OVERVIEWNOTES

ance sheet. Amounts paid are recognised as a receivable, and interest is accrued. There may be negative portfolios which are recognised in other liabilities if the securities are resold.

Cash flow statementThe cash flow statement shows the group’s cash flows for the year divided into cash flows from operating activities, working capital, investing activities and financing activities. The cash flow statement is presented using the indirect method and based on the profit for the year before tax.

Cash flows from operating activities include the items of the income statement adjusted for operating items of a non-cash nature. Realised gains and losses on the sale of tangible assets are included in cash flows from investing activities.

Cash flows from working capital include assets and liabilities related to operating activities, including loans, deposits, etc.

Cash flows from investing activities include acquisitions and divestments of subsidiaries as well as net investments in assets not related to operating activities, including realised gains and losses on the sale of such assets.

Cash flows from financing activities include financing from shareholders as well as financing sourced through short-term and long-term loans, including issued bonds.

Cash and cash equivalents comprise cash at bank and in hand and balances due from credit institutions and central banks with a remaining term of up to three months.

Parent companyThe accounting policies of the parent company on recogni-tion and measurement are consistent with the accounting policies of the group. In addition, investments in subsidi-aries are recognised according to the equity method. This implies that the investments are measured at the propor-tionate share of the subsidiaries’ net asset value at the balance sheet date.

Financial highlightsThe individual lines in the overview of financial highlights on page 4 are described below. The business areas are de-scribed as part of the segment information. Criteria for rec-ognition and measurement are consistent with the group’s accounting policies.

Net interest and fee income, Private: This item compris-es interest and fees related to the bank’s private customers which form part of the bank’s forward-looking activities.

Trading income (excl. value adjustments): This item comprises the bank’s earnings from market activities and the bank’s own portfolio placed in the treasury department. The item also comprises allocation of funding costs to the bank’s business areas, including winding-up activities.

Other income: This item primarily comprises earnings from the subsidiary Alm. Brand Leasing A/S.

Costs: This item comprises staff costs and administrative expenses and other operating expenses in the business ar-eas Financial Markets, Private, Leasing and Other, which are the bank’s forward-looking activities.

Depreciation and amortisation: This item comprises de-preciation and amortisation of non-current assets and assets held under leases.

Value adjustments: This item comprises value adjust-ments from primary and derivative financial instruments which are placed in the bank’s market function and the treasury department.

Profit/loss from investments: This item comprises in-vestments in associates and group enterprises which are not subsidiaries. Non-recurring income of DKK 17 million from the liquidation of Alm. Brand Formue was included in 2014.

Impairment writedowns: This item comprises impairment writedowns related to the loans and advances provided to bank’s private customers which form part of the bank’s for-ward-looking activities.

Winding-up activities: This item shows the results of the winding-up activities. The profit/loss before writedowns, which comprises interest, fees, staff costs and adminis-trative expenses and value adjustments. Writedowns are related to exposures to small and medium-sized commercial customers, agricultural customers, property development projects and credit-related value adjustments of mortgage deeds, including the option premium received from the loss option issued to Alm. Brand Forsikring A/S.


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Total risk exposure amount

Exchange rate indicator 1 = Exchange rate indicator 1 is the largest of currency positions

in which the bank has a net receivable and currency

positions where the bank has a net payable.

Exchange rate indicator 2 = Exchange rate indicator 2 provides an overview of the exchange

rate risk and indicates that if the bank does not change currency

positions within 10 days, there is a 1% probability that the bank

will suffer a loss that is higher than the indicator value.

Tier 1 capital after deductions

Shareholders' equity at beginning of year + shareholders' equity at year-end

2

Interest receivable Interest payable

Average interest-bearing assets

Equity ratio =

Average shareholders' equity =

Return on equity before tax (%)

Interest margin (%) =Average interest-bearing liabilities

=Profit after tax - minority interests before tax

Average shareholders' equity

Return on equity after tax (%) =Profit after tax - minority interests after tax

Average shareholders' equity

Total capital ratio =Total capital


Tier 1 capital ratio =Tier 1 capital including additional tier 1 capital less deduction


Foreign exchange position (%) =Exchange rate indicator 1

Tier 1 capital including additional tier 1 capital less deduction

Foreign exchange risk (%) =Exchange rate indicator 2


Income/cost ratio =Income

Costs

Interest rate risk (%) =Interest rate risk


Loans and advances =Loans, advances and other receivables at fair value +

Loans, advances and other receivables at amortised cost

Loans and advances as a percentage of deposits (%) =Loans and advances + Impairment losses

Deposits and other payables

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Financial ratios

FINANCIAL RATIOS

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OVERVIEW

Return on capital employed (%) =

The calculation of average equity takes into account capital increases where capital increases are included at a proportionate share relative to the date of the change.

Shares held by minority interests are not included in the calculation of average equity.

Excess coverage relative to statutory liquidity

requirement (%)=

At least 10 % or 15 % – the statutory requirement

Excess liquidity after compliance with s. 152(2)

of the Danish Financial Business Act

Total amount of large exposures (%) =Total amount of large exposures

Total capital

Gearing of loans and advances =Loans and advances

Shareholders' equity

Annual growth in lending (%)

Total assets

Funding ratio =Loans and advances

Working capital less bonds with a remaining maturity of less than 1 year

Profit/loss for the year

Share of receivables at reduced interest rate (%) =Receivables at reduced interest rate

Loans and advances, etc. + Guarantees + Impairment losses

Impairment ratio for the year =Impairment losses for the year

Loans and advances, etc. + Guarantees + Impairment losses

=Loans, etc. at year-end - Loans, etc. at beginning of year

Loans and advances at beginning of year

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FINANCIAL RATIOS

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Alm. Brand Bank A/SDK-Midtermolen 72100 Copenhagen ØCVR no 81 75 35 12 almbrand.dk

Since 1792

http://www.almbrand.dk/abdk/English/index.htm

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