Annual Report 2007 A Bank on the Move A number of events and developments in 2007 set SpareBank 1 Midt-Norge on a steady course for the future. We present some of them in this annual report. In figures, in words and in images. 2 Årsrapport 2007 BENNETT AS, Photos: Pål Laukli and Studio Lasse Berre 03 Where to find us VEGA Forvik Brønnøysund NORDLAND 17 4 Terråk Vikna 5 Where to find us 54 Rørvik 32 33 Kolvereid 8 15 7 Overhalla 37 12 36 Osen 31 Grong Namsos 40 30 45 NORD- 55 52 Frøya Åfjord Malm TRØNDELAG 21 Sørli 46 Titran 11 Frohavet Steinkjer Brekstad 16 29 13 42 Hitra 51 Verdalsøra Leksvik 20 Smøla 41 18 n de jor Levanger 1 19 sf Frosta heim Åsen Trond 9 2 Trondheim Stjørdal Kristiansund Aure 50 22 47 Orkanger 35 3 Melhus 24 44 10 23 6 Rindal Tingvoll Molde 27 28 26 Støren 53 49 Tydal Tomra 25 14 Ålesund 56 Åndalsnes Sunndalsøra 39 Sykkylven 48 Östersund 38 Berkåk SØR- MØRE OG ROMSDA L TRØNDELAG 34 Oppdal Volda Valldal Maløy 43 Røros Hellesylt DOVRE- Geiranger FJELL Nordfjordeid Kongsvoll Os Florø Tynset OPPLAND Folldal HEDMARK Lom Skei Askvoll Vågåmo Bøverdal Dale Førde 1 Agdenes 11 Frøya 21 Lierne 32 Namsskogan 40 Roan 49 Surnadal 41 2 12 22 33 50 Aure Grong Malvik Nærøy 42 Rissa Trondheim 3 Averøy 13 Hitra 23 Melhus 34 Oppdal 43 Røros 51 Verdal 4 24 35 44 52 5 Bindal 14 Holtålen Meråker Orkdal Skaun Verran 25 6 15 36 45 53 Eide Høylandet 26 Midtre Gaudal Osen Snåsa Vestnes 27 7 16 Inderøy Molde 37 46 54 Flatanger 28 Overhalla Steinkjer Vikna 8 Fosnes 17 Leka 29 Mosvik 38 Rauma 47 Stjørdal 55 Åfjord 9 Frosta 18 Leksvik 30 Namdalseid 39 Rennebu 48 Sunndal 56 Ålesund 19 10 Fræna 20 Levanger 31 Namsos 04 Contents Contents The Story of SpareBank 1 Midt-Norge 6 SpareBank 1 Brand a Step Further 18 New Head Office City and Bank on the Move 8 Statement by the CEO 20 Important Events in 2007 10 Report of the Board of Directors 22 Macroeconomy and Financial Markets Main Figures Group 12 No Let-Up in 2008 33 SpareBank 1 Fund Where there’s a Will, we Create the Opportunity 14 Corporate Governance 36 Group Management 16 Risk Management and Capital Allocation 40 Key Goals and Strategies 17 Board of Directors 46 0 Contents Contents The Bank and the Society 48 Notes 71 Business Description 54 Cash Flow Statement 119 Income Statement 64 Auditor’s Report 120 Balance Sheet 65 Control Committee’s Report 121 Pro Forma Income Statement Group 66 Financial Summary Group 122 Pro Forma Balance Sheet Group 67 Primary Capital Certificates (PPC) Capital 124 Change in Equity – Group 68 The Supervisory Board 127 Change in Equity – Parent Bank 69 Supervisory Board 128 0 The Story of SpareBank 1 Midt-Norge In an announcement in the Addresseavisen newspaper, five of Trondhjems (as the city was then known) most prominent men urged their fellow citizens to contribute to the establishment of a savings bank, for the “beneficent promotion of enterprise, thrift and public morality”. Thirty-nine men replied to the announcement. The year was 1823, and Trondhjems Sparebank was duly established with an initial capital of 1,9 Specidaler. The first chapter of the story of SpareBank 1 Midt-Norge had now been written. The story 1 Midt-Norge of SpareBank The savings bank industry was born of poverty and need in that the crisis had taken hold of Trondhjems Sparebank. urban areas. The earliest Norwegian savings bank managers When it was heard that Orkedalens Sparebank had asked to took a personal responsibility for the common people’s assets, be placed in administration, panic spread and people started and, through saving, the lower classes would themselves have to withdraw their savings. In the space of just over a week, a hand in improving their conditions. In addition to creating nervous savers withdrew a total of six million kroner. secure institutions in which to deposit savings, savings banks were also keen to promote diligence and public morality. Rock bottom was reached on Thursday 23 April when more than one million kroner were taken out of the Bank in just SOCIAL CONTRIBUTOR one day. A week later calm had returned, and the Bank once The desire to be a contributor, and not just a bank, is probably again recorded a cash surplus at the end of the day. a legacy of the moral aspirations of that period. In 1840 it was decided that part of the Bank’s profits should be allotted “to SOCIETY AND TECHNOLOGY IN CHANGE public and charitable causes”. In the beginning the money In the 1960s the authorities again looked with concern at often went to schools, nursing homes, voluntary organisations the banking structure in Norway; the banking system was or to the community’s paupers. To this day the Bank’s shared lagging behind general social developments. Elsewhere in destiny with the region is a driver behind the support given to society the trend was one of centralisation: fewer, but larger non-profit causes. Each year about a thousand causes benefit entities, whereas the banking industry still comprised a large from financial support from the SpareBank 1 Fund. number of small entities. The challenge was to create a banking structure featuring financially solid banks that did not draw Upon the establishment of the Bank a point was that “small all loanable capital away from the rural communities. sums would be received from persons of either sex”. Trond- hjems Sparebank was not for men alone. Indeed the first Concurrently new technology provided new opportunities mortgage loan granted by the Bank went to a woman. That to extend the range of banking services and we begin to was in 1825, and the mortgaged items included Sakshaug glimpse the outlines of the self-service customer. Norway’s first Church and land properties in Sparbu. cash dispensers saw the light of day in the 1970s. Computer technology also erased many of the differences between GROWTH AND CRISIS commercial banks and savings banks, and with their Trondhjems Sparebank grew in step with the town in the increasingly identical offerings they became competitors to 1800s. In 1874 the Bank purchased the two uppermost a larger degree than previously. properties on the west side of Søndre Street, prompted by the management’s desire for a new bank building. A building AGE OF MERGERS committee was appointed and the new bank building, in the Developments in the 1960s and 1970s forced a number of Venetian Renaissance style, was completed in 1882 at a cost mergers. In 1975 Trondhjems Sparebank merged with Strindens of 421,090 kroner. Sparebank. Trøndelag had now acquired its first major regional savings bank. The new bank featured a decentralised power Good times were replaced by adversity with the advent of the structure with substantial decision-making at branch level. banking crisis at the start of the 1920s. In 1921, Norges Bank The philosophy was that the local community was best taken (the central bank) described Norwegian banks’ credit needs care of by the local community itself. as insatiable, and many banks were in dire straits despite government support. Early in April 1925 there were rumours 07 The story 1 Midt-Norge of SpareBank Merger discussions continued in the 1980s. In 1982 31 savings potential. An offer was made, and after a hard tug-of-war banks were invited to participate in the establishment of Mr Haugan could say: “The acquisition of Romsdals Sparebanken Midt-Norge. Trondhjems Sparebank and Fellesbank is probably the second most important event in the Strindens Sparebank had the new name approved by the Bank’s 182-year history. That is, next after the establishment authorities the following year, but postponed the name change of the Bank itself”. until the merger negotiations were completed. In 1984 it was clear that 23 banks would be joining to form a new regional Whether the Director’s words should be taken literally, or as bank. Sparebanken Inn-Trøndelag and Sparebanken Namdal symbolising an important milestone in the Bank’s history, is were absorbed in 1988. Spareskillingsbanken joined in 1989, difficult to tell. What is certain is that the bar was deliberately after the management’s initial scepticism of the new regional placed high in order to redeem a promise that SpareBank bank. 1 RomsdalsFellesbank would be an even better bank for people in Møre og Romsdal. The acquisition has so far been SPAREBANK 1 ALLIANCE a major success. In Sparebanken Midt-Norge’s annual report published in 1995, Managing Director Finn Haugan wrote that 1996 would FINANCIAL INDUSTRY INTO A NEW bring “a taste of the future”. Mr Haugan was speaking of the REALITY forthcoming SpareBank 1 Alliance between Sparebanken In February 2007 Kredittilsynet (Norway’s Financial Rogaland, Sparebanken Vest, Sparebanken Nord-Norge and Supervisory Authority) approved SpareBank 1 Midt-Norge’s Sparebanken Midt-Norge. The object of the alliance was to application for IRB status. This approval can be compared meet the competition from the major financial groups in the with ISO certification, and ushers in a new epoch in the capital and to strengthen the banks’ position at the local financial industry in terms of control. The application was level. The four regions had already collaborated at an earlier filed in response to new rules for computing capital charges stage. The new alliance put this collaboration on a formal, (Basel II), which are designed to promote stability in the professional footing. financial system. DIGITAL AGE Kredittilsynet’s approval is further confirmation that the The 1990s were also marked by the digital revolution.