Investor Relations. Supplementary information First half and second quarter report 2012

Transcription

1 Investor Relations Supplementary information First half and second quarter report

2 SpareBank 1 SMN 7467 Trondheim Chief Executive, CEO Finn Haugan For further information, please contact Kjell Fordal, Executive Director Finance Division tel Switchboard tel Address SpareBank 1 SMN, Postboks 4796 Sluppen, 7467 Trondheim Visiting address: Søndre gate 4, 7011 Trondheim Information on the Internet SpareBank 1 SMN s home page Hugin-Online ECC information in general Financial Calendar 1 st quarter 26 April 2 nd quarter 09 August 3 rd quarter 26 October - 1 -

3 Contents 1. SpareBank 1 SMN overview Financial highlights Business description Credit ratings Equity capital certificate (MING) Financial results Main figures Net interest income Commission income Operating expenses Loans to customers Distribution of loans by industry Risk profile and write-downs Capital Adequacy Funding Financial results Segment information Extract from income statement Retail division Corporate division Markets Subsidiaries Development last ten years

4 1. SpareBank 1 SMN overview 1.1. Financial highlights First half (Consolidated figures. Figures in parentheses refer to the same period of unless otherwise stated) Profit before tax: NOK 659m (640m) Profit: NOK 510m (505m) Return on equity: 11.7 % (13.0%) Lending growth 10.6% (8.6%), deposit growth 12.0% (11.4%) over past 12 months Loan losses: NOK 25m (7m taken to income) Tier 1 capital adequacy: 11.0 % (10.7 %) Earnings per equity capital certificate (ECC): NOK 2.63 (2.99) Second quarter Profit before tax: NOK 319m (315m) Profit: NOK 238m (250m) Return on equity: 10.7% (12.9%) Loan losses: NOK 17m (1m taken to income) Earnings per equity capital certificate (ECC): NOK 1.22 (1.51) - 3 -

5 1.2. Business description SpareBank 1 SMN is Mid-Norway s largest bank with assets totalling NOK billion at the end of second quarter. Head office is in Trondheim and the Group employs about 1,144 staff. SpareBank 1 SMN is organised in six divisions to secure a customer-oriented and cost-effective organisation while respecting the differing competencies required by each division. The Retail, Corporate and Markets divisions focus on customer satisfaction, risk management and activitybased sales and counselling. Business Support and Communication focuses on cost-effective work processes and support to enable the customer-facing divisions to attain their goals, while the Finance Division provides an overall basis for decision making, risk management and financial and asset-liability management. Legal Kjersti Hønstad Board of Directors CEO Finn Haugan Administration Berit Rustad Risk Ola Neråsen Finance Kjell Fordal Corporate Vegard Helland Retail Tore Haarberg Markets Dag Ivar Thobroe Communication Wenche M. Seljeseth Business Support Tina Steinsvik Sund Creates basis for decision making, risk management, financial and funding Focus on customer satisfaction, risk management and activity - based sales and advices Focus on cost-effective work prosesses and support for customer facing operstions - 4 -

6 Overall organisation Supervisory Board Chair Randi Dyrnes ECC holders Depositors County Council Employees External audit 40 % % % 25 % Deloitte Control Comitee Rolf Røkke Board of Directors Chair: Per Axel Koch Deputy chair: Kjell Bjordal Bård Benum, Paul E. Hjelm-Hansen, Aud Skrudland, Arnhild Holstad, Elbjørg Gui Standal, Venche Johnsen CEO Finn Haugan Election Comitee Widar S Andersen Internal audit KPMG SpareBank 1 SMN: Overview of the Bank's activities Datterselskaper SpareBank 1 Gruppen 19. 5% Bank 1 Oslo 19.5 % BN Bank 33 % SpareBank 1 Boligkreditt (17.8%) and Næringskredit (37%) EiendomsMegler 1 Midt-Norge 88% Skadeforsikring SpareBank 1 Finans 100% Liv og pensjon SpareBank 1 SMN Regnskap 100% Markets SpareBank 1 SMN Invest 100% Gruppen Finans Allegro Finans 91% ODIN SpareBank 1 Kvartalet 100% - 4 -

7 SpareBank 1 Alliance companies Members SpareBank 1 Group The SpareBank 1 banks operate an alliance and develop product companies through the jointly owned holding company SpareBank 1 Gruppen. The paramount objective of the SpareBank 1 Alliance is to assure the individual bank s independence and regional identity through strong competitiveness, profitability and financial soundness. The Alliance is among the largest providers of financial services in Norway and a full-fledged alternative to traditional financial groups. SpareBank 1 Alliance structure SpareBank 1 SMN SpareBank 1 SR-Bank SpareBank 1 Nord-Norge Samspar Sparebanken Hedmark LO Products, commissions, dividends Sales, loan portfolios, capital BN Bank Bank 1 Oslo SpareBank 1 Gruppen AS SpareBank 1 Covered Bonds, residential SpareBank 1 Covered Bonds, Commercial SpareBank 1 Life insurance (100%) SpareBank 1 Nonlife insurance (100%) ODIN Asset management (100%) SpareBank 1 Markets (97%) Collection (90%) SpareBank 1 Factoring (100%) Banking Cooperation - 5 -

8 1.3. Credit ratings Moody's Todays Year end rating Outlook Ratings under review Stable Stable Negative Negative Stable Positive Issuer Rating A1 A1 A1 A1 A1 Aa3 A3 Bank Deposits A1/P-1 A1/P-1 A1/P-1 A1/P-1 Aa3/P-1 Aa3/P-1 A3/P-2 Bank Financial Strenght C- C- C- C- C C+ C Senior Unsecured A1 A1 A1 A1 Aa3 Aa3 A3 Subordinate A2 A2 A2 A2 A1 A1 Baa1 Fitch Year end Todays rating Outlook Stable Stable Negative Negative Stable Stable Positive Long-term IDR A- A- A A A A A- Short-term IDR F2 F2 F1 F1 F1 F1 F2 Support rating Individual rating B/C B/C B/C B/C B B B/C 1.4. Equity capital certificate (MING) The key figures are corrected for issues. 30 June the price of the Bank s ECC was NOK (NOK 45.18). Earnings per ECC were NOK 2.63 (NOK 2.99). Book value per ECC was NOK as of end second quarter (NOK 46.36). Key figures 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 ECC price Number of certificates issued, millions Booked equity capital per ECC (incl. dividend) Adjusted profit per ECC P/E per ECC P/B equity capital Stock price compared with OSEBX and OSEEX 1 July 2010 to 30 June Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 SMN OSEBX OSEEX OSEBX = Oslo Stock Exchange Benchmark Index (rebased) OSEEX = Oslo Stock Exchange ECC Index (rebased) - 6 -

9 Trading statistics 1) 1 July 2010 to 30 June 5,000 4,000 3,000 2,000 1,000 0 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 1) Total number of ECs traded (1000) Market value and profit per ECC , ,000 4, , , , Q 4Q 1Q 3Q 4Q 1Q Market value, NOK mill. Adjusted profit per ECC Equity certificates ratio (parent bank) 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 ECC capital 2,484 2,373 2,373 2,373 2,372 2,372 Dividend equalisation reserve 1,457 1,457 1,457 1,160 1,160 1,160 Premium reserve Unrealised gains reserve A. The equity certificate owner's capital 4,799 4,055 4,055 3,743 3,742 3,742 Saving bank reserve 2,611 2,611 2,611 2,345 2,345 2,345 Unrealised gains reserve B. The saving bank reserve 2,636 2,639 2,639 2,362 2,362 2,362 Provision for gifts Recommended dividends Equity ex. profit 7,435 6,694 6,924 6,105 6,104 6,581 Equity certificates ratio A/(A+B) 64.5 % 60.6 % 60.6 % 61.3 % 61.3 % 61.3 % - 7 -

10 20 largest ECC holders Owner Reitangruppen AS Aker ASA / The Resource Group TRG Odin Norge Odin Norden Frank Mohn AS Vind LV AS Rasmussengruppen AS MP Pensjon PK Citibank N.A New York Branch (nominee) Danske Invest Norske Aksjer Inst Stiftelsen Uni I.K. Lykke, T.Lykke m.fl. Tonsenhagen Forretningssentrum AS Verdipapirfondet Fondsfinans Spar Forsvarets personellservice Stenshagen Invest Morgan Stanley & Co. KLP Aksje Norden VPF State Street Bank & Trust Company (nominee) Odin Europa SMB Total largest shareholders Other Total Number 9,019,108 3,719,255 3,505,454 2,894,751 2,876,968 2,736,435 2,278,455 1,893,415 1,806,870 1,715,512 1,370,917 1,161,567 1,135,193 1,040,000 1,034,246 1,014, , , , ,041 42,936,264 81,282, ,218,466 Ownership in % 7.31 % 3.01 % 2.84 % 2.35 % 2.33 % 2.22 % 1.85 % 1.53 % 1.46 % 1.39 % 1.11 % 0.94 % 0.92 % 0.84 % 0.84 % 0.82 % 0.80 % 0.79 % 0.76 % 0.67 % % % % ECC capital history Year Change 1991 Placing 1992 Placing 2000 Employee placing 2001 Employee placing 2002 Employee placing 2004 Bonus Issue 2005 Placing 2005 Employee placing 2005 Split 2005 Bonus Issue 2007 Dividend Issue 2007 Employee placing 2008 Dividend Issue 2008 Employee placing 2009 Bonus Issue 2010 Placing 2010 Employee placing Issue Placing Employee placing Change in ECC capital Total ECC capital No. of ECC's ,250, ,000,000 6,053, ,099,432 6,148, ,685,075 9,859, ,009 10,097,817-1,009 40,391, ,262 50,489, ,344 53,752, ,349 53,976, ,440 1,447 57,603,748 57,861, ,736 69,434, ,360 94,397, ,373 94,905, ,373 94,930, ,468 2, ,407, ,218,

11 2. Financial results Accounting principles SpareBank 1 SMN prepares and presents its quarterly accounts in compliance with the Stock Exchange Regulations, Stock Exchange Rules and International Financial Reporting Standards (IFRS), including IAS 34, Interim Financial Reporting. As from 2007 the company accounts are also prepared and presented under IFRS. This entails that investments in associates and subsidiaries are recognised using the cost method. For this reason results recorded by associates and subsidiaries are not included in the parent bank's accounts. Further, the Group has in this quarterly report used the same accounting principles and calculation methods as in the latest annual report and accounts. The quarterly accounts do not include all the information required in a complete set of annual financial statements and should be read in conjunction with the annual accounts for. As from January the Group has implemented new requirements in IAS 34 Interim Financial Reporting as regards changes in business or financial factors that affect fair value measurement of an entity s financial assets and liabilities, and as regards transfer between levels in the fair value hierarchy used to measure the fair value of financial instruments. In addition there is the possible reclassification of financial assets resulting from a change in the purpose or application of these assets. The Group has also implemented IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, and the new IAS 24 Related Party Disclosures. None of these standards has entailed any essential change in Group reporting Main figures 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest ,392 1,317 Commission income and other income Net return on financial investments Total income ,483 1,341 2,789 2,555 Total operating expenses ,482 1,140 Result before losses ,306 1,414 Loss on loans, guarantees etc Result before tax ,279 1,282 Tax charge Net profit ,024 1,022 Balance sheet - condensed 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. Balance (in NOK million) 2010 Total assets 107,815 99, , ,009 98,503 97,997 Average total assets 103, , ,732 99,212 96,435 96,632 Gross loans to customers * 100,552 97,387 95,232 92,671 90,939 87,665 Deposits from customers 51,504 48,974 47,871 46,024 45,990 42,786 Total equity capital 9,365 8,393 8,348 8,126 7,902 7,846 * Loans to customers includes SpareBank 1 Boligkreditt and Sparebank 1 Næringskreditt Key figures 1Q 4Q 3Q 30 Jun Return on equity 10.7 % 13.0 % 13.6 % 12.0 % 12.9 % 11.7 % 13.0 % 12.8 % 14.6 % Core capital ratio 11.0 % 10.3 % 10.4 % 10.4 % 10.7 % 11.0 % 10.7 % 10.4 % 10.9 % Cost/income ratio group 54.4 % 53.3 % 53.4 % 53.5 % 53.4 % 53.8 % 52.8 % 53.2 % 44.6 % Growth in loans incl Boligkreditt last 12 months 10.6 % 9.9 % 8.6 % 7.7 % 8.6 % 10.6 % 8.6 % 8.6 % 13.2 % Growth in deposits last 12 months 12.0 % 14.2 % 11.9 % 19.1 % 11.4 % 12.0 % 11.4 % 11.9 % 14.9 % Deposits-to-loan ratio 70.0 % 68.3 % 65.5 % 64.3 % 67.1 % 70.0 % 67.1 % 65.5 % 61.3 % Impairment losses ratio 0.07 % 0.04 % 0.11 % 0.03 % % 0.05 % % 0.03 % 0.16 % Non-performing commitm. as % of gross loans 0.34 % 0.33 % 0.36 % 0.36 % 0.40 % 0.34 % 0.40 % 0.36 % 0.57 % ECC price Booked equity capital per ECC (incl. dividend) Adjusted profit per ECC

12 2.2. Net interest income Net interest income 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Interest income 989 1,009 1,029 1, ,998 1,851 3,891 3,422 Interest expences ,278 1,151 2,499 2,105 Net interest income ,392 1,317 As percentage of total income 50 % 47 % 44 % 52 % 51 % 49 % 52 % 50 % 52 % Development in net interest income % 52% % % 50% 50.0 % 45.0 % % 40.0 % % % 11 3Q11 4Q11 1Q12 12 Net interest income, NOK mill As percentage of total income Changes in interest income from lending and deposits, last 12 months (in NOK million) Volume Margin Total Lending Deposits Total

13 Changes in net interest income 30 Jun. (in NOK million) Change Net interest income Equity capital 13 Lending volume 28 SpareBank 1 SMN Finans 5 Fees on lending -13 Deposit margin -65 Deposit volume 11 Lending margin 84 Funding and liquidity buffer -42 Change Net interest income 11 Lending margin Lending volume Equity capital Deposit volume SpareBank 1 SMN Finans Fees on lending Funding and liquidity buffer Deposit margin Net interest income

14 Margin development Definition margin: Average customer interest minus 3 months average nibor Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Lending margin Deposits margin Volume development 120 Volume in NOK bn Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Lending volume Deposits volume

15 2.3. Commission income Total commission and other income 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Guarantees SpareBank 1 Boligkreditt Commission of savings products Real estate agency Insurance Payments transmission Other Total commissions income Operating- and sales income real estate Other operating income Total other operating income Commission expenses Total commissions and other income As percentage of total income 39 % 32 % 30 % 35 % 34 % 35 % 34 % 33 % 33 % Change in commission income 30 Jun. (in NOK million) Change Total Real estate agency 15 Other operating income 25 Operating- and sales income real estate 6 Insurance 8 Commission of savings products 3 Commission expenses -6 Other -5 Payments transmission -2 Guarantees 0 SpareBank 1 Boligkreditt

16 Net return on financial investments 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Income from investment in related companies of which SpareBank 1 Gruppen AS BN Bank ASA Bank 1 Oslo Akershus AS SpareBank 1 Boligkreditt AS SpareBank 1 Næringskreditt AS Polaris Media AS Other 1) Capital gains/dividens, shares and ECCs 2) of which dividends capital gains on shares capital gains on ECCs Capital gains, bonds and derivatives Net gain on trading and derivatives Markets Net return on financial investments As percentage of total income 11 % 21 % 26 % 13 % 15 % 16 % 14 % 17 % 15 % 1) These companies were essentially established to handle corporate exposures taken over from other entities. 2) Including net gain/losses from SpareBank 1 SMN Invest AS, which manages parts of the Bank's share portfolio Change in net return on financial investments 30 Jun. (in NOK million) Change Total Capital gains from bonds and derivatives 36 Capital gain, SMN Markets 34 Capital gains/dividends on shares and ECC's -46 Income from investment in related companies

17 2.4. Operating expenses Operating expenses 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Salary Pension costs (defined benefit plan) Employer's insurance contributions Other personnel expenses Total personnel expenses EDP and telecommunication expenses Postage and transportation services Marketing Operating exp. on properties and premises Other external services Other operating expenses Depr./write-downs of fixed & intangible assets Other expenses Total operating expenses Cost/income ratio Cost/income ratio ex financial inv month cost growth* 12.7 % 14.4 % 30.0 % 29.1 % 39.2 % 12.7 % 39.2 % 30.0 % -9.0 % * Year to date. Write-back of early retirement liabilities (AFP), NOK 117 mill, in 1st quarter 2010, hence the high cost growth Change in operating expenses 30 Jun. (in NOK million) Change Total Total personnel expenses 50 Depr./write-downs of fixed & intangible assets 8 EDP and telecommunication expenses 4 Other operating expenses 24 Operating exp. on properties and premises 3 Other external services 2 Marketing - 1 Postage and transportation services - 0 Cost/income ratio NOK mill % % % 54 % % Q11 4Q11 1Q12 12 Income Expenses Cost/income ratio * * Total operating expences as a percentage of total operating income 50 %

18 Developement of employees Employees in employment Retail market division C orporate market SpareBank 1 SMN Markets Business operations Management and staff Parent bank EiendomsMegler 1 Midt-Norge AS Allegro Finans AS SpareBank 1 SMN Finans AS SpareBank 1 SMN Regnskap AS SpareBank 1 Kvartalet and other Total 1,144 1,098 1,035 1, Employees in employment Parent bank SpareBank 1 SMN Regnskap AS Other EiendomsMegler 1 Midt-Norge AS SpareBank 1 SMN Finans AS

19 3. Loans to customers 3.1. Distribution of loans by industry Distribution of loans by industry 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Agriculture/forestry/fisheries/hunting 5,652 5,568 5,217 4,619 4,525 4,892 Fish farming 2,096 1,654 2,026 2,013 2,426 1,906 Manufacturing and mining 3,329 2,574 2,881 3,026 2,805 2,775 Construction, power and water supply 3,063 3,856 2,572 2,480 2,825 2,511 Retail trade, hotels and restaurants 2,324 2,206 2,337 2,318 2,407 2,503 Maritime sector 5,946 5,744 5,978 5,558 5,389 5,242 Property management 11,877 11,272 12,179 12,236 12,314 13,013 Business services 3,678 3,584 3,867 3,608 3,334 3,134 Transport and other services provision 2,164 2,620 2,078 2,058 2,055 1,628 Public administration Other sectors 2,646 1, , Gross loans in corporate market 42,807 40,571 40,198 39,021 38,832 38,046 Retail customers 57,746 56,816 55,034 53,650 52,107 49,619 Gross loans incl. Boligkreditt and Næringskr. 100,552 97,387 95,232 92,671 90,939 87,665 - Adv. of this boligkreditt og næringskreditt 26,958 25,706 22,126 21,101 22,379 17,818 Gross loans in balance sheet 73,595 71,681 73,105 71,570 68,559 69,847 Share of loans, corporate market 42.6 % 41.7 % 42.2 % 42.1 % 42.7 % 43.4 % Share of loans, retail market 57.4 % 58.3 % 57.8 % 57.9 % 57.3 % 56.6 %

20 3.2. Risk profile and write-downs Actual risk profil, Exposure At Default NOK billion A B C D E F G H I J K Risk classification in SpareBank 1 SMN Risk class Low High A AAA - A3 B Baa1 - Baa2 C Baa3 D Ba1 E Ba2 F G Ba2 - B1 H B1 - B2 I B3 - caa3 J Default K Written down Risk class A represents the lowest risk and class K the highest risk. * Probability of default PD* in percent Corresponding ratingclass at Moody's Write-downs on loans and guarantees 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Increase in and new individual write-downs Reassessments and recoveries Total individual write-downs Change in group write-downs on loans Write-downs on loans and guarantees As % of gross loans incl. Boligkreditt 0.07 % 0.04 % 0.11 % 0.03 % % 0.05 % % 0.03 % 0.16 %

21 Loss on loans by segment 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Corporate Retail SMN Finans and other Collective write downs Total loss on loans Q11 4Q11 1Q12 12 Corporate Retail SMN Finans and other Collective write downs Individual and collective write-downs 1Q 4Q 3Q (in NOK million) 2010 Individual write-downs to cover loss on loans, guarantees at start of period Confirmed losses in the period on loans, guarantees etc., not prev. subject to ind. write down Reversal of previous years' write downs Increase in write downs of commitments not previously subject to individual write down Write downs of loans not previously subject to 30 Jun. individual write down Individual write downs to cover loss Collective write downs to cover loss on loans, guarantees at start of period Period s collective write down to cover loss on loans, guarantees etc Collective write downs to cover loss on loans, guarantees

22 Loans and guarantees by industry Total Very low risk Low risk Medium risk Default and written down Wage earners 63,234 49,977 8,841 3, Public administration Agriculture and forestry 6,340 3,189 1,435 1, Sea farming industries 3,023 2, Manufacturing 4,609 1,370 1,589 1, Construction, power and water supply 4,446 1, , Retail trade, hotels and restaurants 3, , Maritime sector 1, Property management 14,697 2,654 4,072 7, Business services 4,549 1, , Transport and other services provision 8,650 1,735 3,607 3, Finance Other sectors 1, ,797 65,086 24,312 22,182 1,935 1, ,621 60,977 22,594 21,498 2,199 1, ,801 52,410 20,338 20,439 2,451 2, High risk Very high risk Write-down ratio 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Non-performing commitments (gross) Impaired commitments (gross) Gross non-performing and impaired commitments Individual write-downs Collective write-downs Write-down ratio (%) 84.9 % 90.5 % 85.2 % 81.0 % 86.5 % 72.1 % Default in excess of 90 days NOK million Q 4Q 1Q Retail > 90 d Corporate > 90 d

23 Net non-performing and impaired commitments NOK million 1, % 1, % % % 0.53 % 0.5 % Q11 4Q11 1Q12 12 Gross non-perf. and impaired comm. Individual and collective write-downs Gross non-perf. and impaired comm. as % of net lending 0.0 %

24 4. Capital Adequacy New capital adequacy rules were introduced in Norway as from 1 January 2007 (Basel II - the EU's new directive on capital adequacy). SpareBank1 SMN applied to and received permission from Finanstilsynet (Financial Supervisory Authority of Norway) to use internal rating methods (Internal Rating Based Approach - Foundation) to calculate charges for credit risk from 1 January 2007 onwards. This will make the statutory minimum capital adequacy requirement more risk-sensitive, so that it better reflects the risk in the underlying portfolios. Using IRB demands high standards of the Bank s organisation, competence, risk models and risk management systems. Under interim regulations issued by Finanstilsynet, IRB banks are not yet seeing the full effect of the reduced capital requirements. As from 2009, a 20% reduction of the risk-weighted basis of calculation was allowed. Subordinated debt and hybrid capital Subordinated debt ranks behind all other liabilities. Dated subordinated loans cannot constitute more than 50 per cent of tier 1 capital for capital adequacy purposes, while perpetual subordinated loans cannot constitute more than 100 per cent of tier 1 capital. Subordinated loans are classified as a liability in the balance sheet and are measured at amortised cost in the same way as other long-term loans. Hybrid capital denotes bonds with a nominal interest rate, but the bank is not obliged to pay interest in a period where dividends are not paid, and neither is the investor subsequently entitled to interest that has not been paid, i.e. interest does not accumulate. Hybrid capital is approved as an element of tier 1 capital up to limit of 15 per cent of aggregate tier 1 capital. Finanstilsynet (Norway s FSA) can require hybrid capital to be written down in proportion with equity capital should the bank s tier 1 capital adequacy fall below 5 per cent or total capital adequacy falls below 6 per cent. Written-down amounts on hybrid capital must be written up before dividends can be paid to shareholders or before equity capital is written up. Hybrid capital is shown as other long-term debt at amortised cost. For detailed information regarding subordinated debt and hybrid capital, see note 34 in the Bank s annual report

25 Capital Adequacy 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Equity certificates capital 2,484 2,373 2,373 2,373 2,373 2,373 - Own equity certificates capital Premium reserve Equalisation reserve 1,457 1,457 1,457 1,160 1,160 1,159 Savings bank's reserve 2,611 2,611 2,611 2,344 2,345 2,345 Recommended dividends Provision for gifts Reserve for unrealised gains Other equity and minority interest 1,400 1,404 1,409 1,261 1,267 1,244 Net profit Total book equity 9,365 8,393 8,348 8,126 7,902 7,846 Deferred tax, goodwill and other intangible assets Share of reserve for unrealised gains in associates Deduction for allocated dividends % deduction for subordinated capital in other financial institutions % deduction for expected losses on IRB, net of write-downs % capital adequacy reserve Share of non-performing, non-amortizsed estimate deviations Net profit Year-to-date profit included in core capital (50%) Fund bonds, hybrid capital 1,130 1,143 1,170 1,159 1,110 1,106 Total core capital 8,722 7,902 7,856 7,504 7,394 7,283 Supplementary capital in excess of core capital Fund bonds, hybrid capital in excess of 15 % Perpetual subordinated capital Dated subordinated capital 1,653 1,598 1,674 1,659 1,574 1, % deduction for subordinated capital in other financial institutions % deduction for expected losses on IRB, net of write-downs % capital adequacy reserve Total supplementary capital 1,178 1,107 1,199 1,171 1,102 1,360 Net subordinated capital 9,900 9,008 9,055 8,675 8,496 8,643 Minimum requirements subordinated capital 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Involvement with spesialised enterpises 1,584 1,466 1,456 1,375 1,408 1,386 Other corporations exposure 1,511 1,519 1,313 1,240 1,203 1,120 SME exposure Retail morgage exposure Other retail exposure Equity investments Total credit risk IRB 3,707 3,578 3,357 3,201 3,154 3,058 Debt risk Equity risk Currency risk Operational risk Exposures calculated using the standardised approach 2,121 2,018 2,184 2,068 1,962 1,864 Deductions Minimum requirements subordinated capital 6,371 6,127 6,029 5,748 5,522 5,335 Core capital ratio % % % % % % Capital adequacy ratio % % % % % %

26 Capital Adequacy % % % % % % % % % % 30 Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Capital adequacy ratio Core capital ratio

27 5. Funding Funding maturity dates NOK mill > 2017 Capital markets funding 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 NOK Bonds 21,380 19,139 19,224 16,780 16,872 16,531 Curr Bonds 6,257 6,298 8,803 8,898 9,187 11,176 NOK CD's 1, Interbank 6,968 5,189 5,232 5,348 6,635 7,743 Loans from central bank - - 1,000 1,000 1,000 1,000 Gov. Swap arrangement 2,553 2,553 2,886 4,318 4,318 4,318 Perp. Sub. Loan capital Hybrid equity Subordinated loan capital 1,388 1,333 1,409 1,394 1,310 1,358 Other liabilities 8,558 5,249 4,655 5,856 3,204 3,058 Total 48,834 40,462 43,936 44,769 43,756 46,519 Curr Bonds 13 % NOK CD's 3 % Interbank 14 % Gov. Swap arrangement 5 % Hybrid equity 1 % Subordinated loan capital 3 % NOK Bonds 44 % Other liabilities 18 %

28 6. Financial results Financial results 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Interest income 989 1,009 1,029 1, ,998 1,851 3,891 3,422 Interest expenses ,278 1,151 2,499 2,105 Net interest ,392 1,317 Commission income Commission expenses Other operating income Commission income and other income Dividends Income from investment in related companies Net return on financial investments Net return on financial investments Total income ,483 1,341 2,789 2,555 Staff costs Administration costs Other operating expenses Total operating expenses ,482 1,140 Result before losses ,306 1,414 Loss on loans, guarantees etc Result before tax ,279 1,282 Tax charge Net profit ,024 1,022 Majority share ,016 1,017 Minority interest Balance sheet 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Cash and receivables from central banks 1, , ,922 2,112 Deposits with and loans to credit institutions 2,623 1,576 2,557 1,142 1, Gross loans to customers before write-down 73,595 71,681 73,105 71,570 68,559 69,847 - Specified write-downs Write-downs by loan category Net loans to and receivables from customers 73,139 71,227 72,643 71,121 68,092 69,336 Fixed-income CDs and bonds at fair value 16,955 13,278 12,918 15,424 14,988 16,980 Derivatives 4,243 3,645 3,697 3,316 1,619 1,825 Shares, units and other equity interests Investment in related companies 4,628 4,582 4,259 4,258 4,215 3,526 Goodwill Other assets 3,998 2,974 2,779 3,278 3,170 2,722 Assets 107,815 99, , ,009 98,503 97,997 Deposits from credit institutions 9,520 7,742 9,118 10,666 11,953 13,062 Deposits from and debt to customers 51,504 48,974 47,871 46,024 45,990 42,786 Debt created by issue of securities 28,341 25,569 28,148 25,885 26,382 27,941 Derivatives 4,097 3,120 3,158 3,008 1,559 1,684 Other liabilities 2,325 2,656 2,122 3,638 2,201 1,922 Subordinated loan capital 2,662 2,576 2,690 2,663 2,516 2,758 Total liabilities 98,450 90,637 93,107 91,884 90,601 90,152 Equity capital certificate 2,484 2,373 2,373 2,373 2,373 2,373 Own holding of ECCs Premium fund Dividend equalisation fund 1,457 1,457 1,457 1,160 1,160 1,159 Recommended dividends Provision for gifts Savings bank s reserve 2,611 2,611 2,611 2,344 2,345 2,345 Unrealised gains reserve Other equity capital 1,264 1,268 1,274 1,127 1,138 1,147 Result of the period Minority interests Total equity capital 9,365 8,393 8,348 8,126 7,902 7,846 Total liabilities and equity 107,815 99, , ,009 98,503 97,

29 Key figures 1Q 4Q 3Q 2010 Return on equity 10.7 % 13.0 % 13.6 % 12.0 % 12.9 % 11.7 % 13.0 % 12.8 % 14.6 % Cost/income ratio group 54.4 % 53.3 % 53.4 % 53.5 % 53.4 % 53.8 % 52.8 % 53.2 % 44.6 % Cost/income ratio group, ex. financial inv % 67.8 % 72.3 % 61.5 % 62.6 % 64.2 % 61.4 % 64.1 % 52.5 % Cost/income ratio parent bank 35.5 % 55.1 % 61.4 % 54.8 % 37.9 % 43.2 % 44.4 % 50.5 % 40.2 % 12-month cost growth* 12.7 % 14.4 % 30.0 % 29.1 % 39.2 % 12.7 % 39.2 % 30.0 % -9.0 % Gross loans to customers** 100,552 97,387 95,232 92,671 90, ,552 90,939 95,232 87,665 Growth in loans last 12 months** 10.6 % 9.9 % 8.6 % 7.7 % 8.6 % 10.6 % 8.6 % 8.6 % 13.2 % Growth in loans this period** 3.2 % 2.3 % 2.8 % 1.9 % 2.6 % 5.6 % 3.7 % 8.6 % 13.2 % Deposits from customers 51,504 48,974 47,871 46,024 45,990 51,504 45,990 47,871 42,786 Growth in deposits last 12 months 12.0 % 14.2 % 11.9 % 19.1 % 11.4 % 12.0 % 11.4 % 11.9 % 14.9 % Growth in deposits this period 5.2 % 2.3 % 4.0 % 0.1 % 7.2 % 7.6 % 7.5 % 11.9 % 14.9 % Ordinary lending financed by ordinary deposits 70.0 % 68.3 % 65.5 % 64.3 % 67.1 % 70.0 % 67.1 % 65.5 % 61.3 % Total assets 107,815 99, , ,009 98, ,815 98, ,455 97,997 Average total assets 103, , ,732 99,212 96, ,766 96,954 98,465 91,317 Employees in employment group 1,144 1,097 1,109 1,085 1,047 1,144 1,047 1,109 1,035 Employees in employment parent bank Employees in employment subsidiares Number of branches Lending margin Deposit margin (0.04) Net other operating income of total income 39.2 % 31.5 % 30.0 % 34.6 % 34.4 % 35.3 % 33.8 % 33.0 % 33.5 % Capital adequacy ratio 12.4 % 11.8 % 12.0 % 12.1 % 12.3 % 12.4 % 12.3 % 12.0 % 13.0 % Core capital ratio 11.0 % 10.3 % 10.4 % 10.4 % 10.7 % 11.0 % 10.7 % 10.4 % 10.9 % Total core capital 8,722 7,902 7,856 7,504 7,394 8,722 7,394 7,856 7,283 Net subordinated capital 9,900 9,008 9,055 8,675 8,496 9,900 8,496 9,055 8,643 Impairment losses ratio 0.07 % 0.04 % 0.11 % 0.03 % % 0.05 % % 0.03 % 0.16 % Non-performing commitm. as % of gross loans 0.34 % 0.33 % 0.36 % 0.36 % 0.40 % 0.34 % 0.40 % 0.36 % 0.57 % Other doubtfull commitm. as % of gross loans 0.20 % 0.19 % 0.21 % 0.24 % 0.20 % 0.20 % 0.20 % 0.21 % 0.24 % ECC price Number of certificates issued, millions Booked equity capital per ECC (incl. dividend) Adjusted profit per ECC P/E per ECC P/B equity capital * Write-back of early retirement liabilities (AFP), NOK 117 mill, in 1st quarter 2010, hence the high cost growth in ** Gross loans to customers includes Sparebank1 Boligkreditt og Sparebank 1 Næringskreditt 30 Jun

30 7. Segment information 7.1. Extract from income statement Group (in NOK million) Retail Corporate SpareBank 1 SMN Markets Eiendoms Megler 1 Midt- Norge SpareBank 1 SMN Finans Allegro Finans SpareBank 1 SMN Regnskap Uncollated Total Net interest Allocated Total interest income Commission income and other income Net profit on financial investments Total income ,483 Total operating expenses Ordinary operating profit Loss on loans, guarantees etc Result before tax Post-tax return on equity 16.2 % 13.8 % 11.7 % Balance sheet Loans and advances to customers 55,338 40, , , ,552 adv. of this to Boligkreditt -24,921-1, ,958 Individual allowance for impairment on loan Group allowance for impairment on loan Other assets ,616 34,676 Total assets 30,586 39, , , ,815 Deposits to customers 22,644 25, ,990 51,504 Other liabilities and equity 7,943 13, , ,338 56,310 Total liabilites 30,586 39, , , ,

31 Interest income, Retail and Corporate 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Retail Corporate Net interest income ,304 1,293 Developement in margin, Retail and Corporate* 1Q 4Q 3Q 30 Jun. Lending (in percentage) 2010 Retail Corporate Total Q 4Q 3Q 30 Jun. Deposits (in percentage) 2010 Retail Corporate Total *Definition margin: Average customer interest minus 3 months average nibor Development in volume, Retail and Corporate 1Q 4Q 3Q 30 Jun. Lending* (in NOK million) 2010 Retail 55,338 53,538 52,055 50,730 49,317 55,338 49,317 52,055 46,932 Corporate 40,163 39,295 38,655 37,499 37,245 40,163 37,245 38,655 36,379 Total 95,501 92,833 90,711 88,228 86,561 95,501 86,561 90,711 83,311 * Gross loans to customers includes SpareBank 1 Boligkreditt and Sparebank 1 Næringskreditt 1Q 4Q 3Q 30 Jun. Deposits (in NOK million) 2010 Retail 22,644 21,386 21,185 20,519 20,661 22,644 20,661 21,185 19,098 Corporate 25,871 25,458 25,345 23,932 23,640 25,871 23,640 25,345 22,709 Total 48,514 46,844 46,531 44,451 44,302 48,514 44,302 46,531 41,806 Developement in commision income, Retail and Corporate 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Retail Corporate Total

32 7.2. Retail division The Retail Market Division is responsible for all activity directed at the region s retail customers. The Division provides personal financial advice. The Division s aims to attract and retain customers by developing a strong product range, first class advisers, unique accessibility and excellent customer handling. Business description 30 Jun. 30 Jun. Facts about the Divisjon Lending volume 55,338 49,317 Deposits volume 22,644 20,661 No. of debit cards 147, ,772 No. of credit cards 86,036 85,025 No. of internet bank customers 135, ,598 No. of telephone bank customers 140, ,335 No. of active customers 186, ,116 FTEs Financial performance 1Q 4Q 3Q (in NOK million) 2010 Net interest income lending Net interest income deposits Net interest income allocated capital Total interest income Net guarantee commision, incl. Boligkreditt Net commision of savings products Net commision insurance services Net commision payment trans. services Other commision income Net fee and commission income Net profit on financial investments Total income Total operating expences* Results Loss on loans, guarantees etc Results before tax *) Includes both direct and distributed expences 30 Jun. Post-tax return on equity (annualized) 16.2 % 17.6 % 15.8 % 25.5 %

33 Development in margin Definition margin: Average customer interest minus 3 months average nibor Q 4Q 1Q Lending margin Deposits margin Development in lending volume 16 % 55.3 NOK mill. 56, % 9.8% % 53,000 8 % ,000 4 % 47,000 0 % 44,000 3Q 4Q 1Q Lending volume Growth in loans last 12 months Development in deposits volume 12 % 22.6 NOK mill. 23, % 8 % % 22,000 21,000 6 % 20,000 4 % 4.7% 19,000 2 % 18,000 0 % 17,000 3Q 4Q 1Q Deposits volume Growth in deposits last 12 months

34 7.3. Corporate division The Corporate Market Division focuses on financial counseling in investment and operations financing, insurance of individuals and buildings/operating equipment, investment of surplus liquidity and electronic and manual money transfers, domestic and foreign. The business is physically located across the entire market area in order to secure proximity to customers, while bearing in mind the need to ensure that competence units are of sufficient size. The business is highly skills-intensive, and requires a continuous focus on the competence of the individual staff member. To this end the Bank has established an educational facility offering module-based training for all staff. Business description 30 Jun. 30 Jun. Facts about the Divisjon Lending volume 40,163 37,245 Deposits volume 25,871 23,640 No. of active customers 13,241 13,103 FTEs Financial performance 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest income lending Net interest income deposits Net interest income allocated capital Total interest income Net guarantee commision, incl. Boligkreditt Net commision of savings products Net commision insurance services Net commision payment trans. services Other commision income Net fee and commission income Net profit on financial investments Total income , Total operating expences* Results Loss on loans, guarantees etc Results before tax *) Includes both direct and distributed expences Post-tax return on equity (annualized) 13.8 % 14.2 % 13.5 % 12.0 %

35 Development in margin Definition margin: Average customer interest minus 3 months average nibor Q 4Q 1Q Lending margin Deposits margin Development in lending volume 30 % 25 % NOK mill. 45,000 40, % 35, % 30, % 7.6% 7.8% 25,000 5 % 20,000 0 % 15,000 3Q 4Q 1Q Lending volume Growth in loans last 12 months Development in deposits volume 30 % NOK mill. 28, % 20 % % 10 % % % 24,000 5 % 0 % 20,000 3Q 4Q 1Q Deposits volume Growth in deposits last 12 months

36 7.4. Markets SpareBank 1 Markets is a fully fledged investment firm organised as a division in its own right within the Bank. It comprises three income generating units: Fixed Income/Foreign Exchange, Securities and Corporate Finance along with Back Office and Mid Office. The division has risk operations in the fixed income and securities area. All risk business is done from Head Office in Trondheim, while activity in Molde and Ålesund is in the hands of customer brokers who primarily provide services in the fixed income and foreign exchange area. SpareBank 1 SMN Markets ambition is to be the leading capital market operation in Trøndelag and in Nordvestlandet. This ambition will be achieved through a continuous focus on specialist competence and market knowledge. SpareBank 1 SMN established an active asset management agreement with SpareBank 1 Markets in the second quarter of. The agreement puts SpareBank 1 Markets in a stronger position to deliver forex and fixed income products in the primary and secondary market. The business volume is regulated through clear-cut limits on exposure in relation to products and counterparties and brings a significant change in the Bank's risk exposure. Incomes and expenses are distributed between the parties based on an established distribution formula. SpareBank 1 SMN Markets Financial performance 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest income Net interest income allocated capital Total interest income Net fee and commission income Capital gain/agio Securities Total income Total operating expences Results Loss on loans, guarantees etc Results before tax Cost and income (NOK mill.) Result before tax (NOK mill.) Q 4Q 1Q Total operating expences Total income Results before tax

37 7.5. Subsidiaries EiendomsMegler 1 Midt-Norge AS EiendomsMegler 1 Midt-Norge has a solid market-leader position in Nord-Trøndelag and Sør- Trøndelag as well as Møre and Romsdal. The company is owned by SpareBank 1 SMN (87 per cent), SpareBank 1 Nordvest (7.6 per cent) and SpareBank 1 Søre Sunnmøre (5.4 per cent). Financial performance 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest Total interest income Commission income and other income Total income Staff costs Administration costs Other operating expenses Total operating expenses Result before tax Cost and income (NOK mill.) Result before tax (NOK mill.) Q 4Q 1Q Total operating expenses Total income Result before tax

38 SpareBank SMN 1 Finans AS SpareBank 1 SMN Finans is the region s leading finance company and an active partner for businesses. SpareBank 1 SMN Finans emphasises local competence, and works for greater value creation in Trøndelag and Nordvestlandet. The company services the market through its own sales operation and through the Bank s offices and suppliers. SpareBank 1 SMN Finans owns the subsidiary SpareBank 1 Bilplan which specialises in car fleet management and offers one-stop solutions for industry and the public sector nationwide. An agreement has been established with SpareBank 1 Nordvest and SpareBank 1 Søre Sunnmøre bringing these banks in as owners with 9.9 per cent of the shares of SpareBank 1 SMN Finans. The transaction was effected as of 1 July as a stock placing reflecting the book value of SpareBank 1 SMN Finans Financial performance 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Total interest income Commission income and other income Net profit on financial investments Total income Staff costs Administration costs Other operating expenses Total operating expenses Ordinary operating profit Loss on loans, guarantees etc Total costs incl. loss on loans Result before tax Cost and income (NOK mill.) Result before tax (NOK mill.) Q 4Q 1Q Total costs incl. loss on loans Total income Result before tax