SpareBank 1 Næringskreditt Covered Bond Issuer. Investor Presentation June 2014

Transcription

1 SpareBank 1 Næringskreditt Covered Bond Issuer Investor Presentation June 2014

2 Disclaimer By attending the meeting where this presentation is made, you agree to be bound by the following conditions: This document may be distributed only: (a) (i) outside the United States in compliance with Rule 903 or 904 of Regulation S under the U.S. Securities Act of 1933, as amended (the Securities Act ), or (ii) to a person who is a Qualified Institution Buyer ( QIB ) within the meaning of, and in compliance with, Rule 144A of the Securities Act; and (b) in accordance with all applicable U.S. State securities laws. This document does not constitute an offering circular in whole or in part and you must read the actual offering circular related to the notes before making an investment decision. The offering circular for the issuance is available from the arranger. You should consult the offering circular for more complete information. This document is presented solely for information purposes and does not constitute an offer to sell, or the solicitation of an offer to buy, any securities or related financial instruments and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient By electing to view this presentation, you represent, warrant and agree that you will not attempt to reproduce, re-transmit or otherwise divulge the contents of this presentation by any means without the prior consent of SpareBank 1 Næringskreditt AS (the SpareBank ). The recipient of this presentation should not base any behaviour in relation to qualifying investments or relevant products which would amount to market abuse on the information in this presentation until after the information has been made generally available, nor should the recipient use the information in this presentation in any way which would constitute market abuse. Any notes issued by SpareBank will not be registered under the Securities Act of 1933 (the Securities Act ), as amended, under applicable state securities laws, or under the law of any other jurisdiction. Notes will only be offered (i) in offshore transactions to non-u.s. persons in reliance upon Regulation S under the Securities Act; and (ii) to qualified institutional buyers in reliance upon rule 144A under the Securities Act. Any offering of notes to be made in the United States will be made by means of an offering circular that may be obtained from the dealers. Such offering circular will contain, or incorporate by reference, detailed information about SpareBank 1 Næringskreditt AS, its business and financial results. Under no circumstances shall the information presented herein constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Any such offer would be made only after a prospective participant had completed its own independent investigation of the notes and related transactions and the collateral pool, and received all information it required to make its own investment decision, including, where applicable, a review of any prospectus, prospectus supplement, offering circular or memorandum describing such security or instrument. That information would supersede this material and contain information not contained herein and to which prospective participants are referred. We have no obligation to tell you when information herein is stale or may change, nor are we obligated to provide updated information on the notes. SpareBank is not responsible for the lawfulness of the acquisition of any notes by a prospective purchaser with regard to any law, regulation or policy applicable to it. A prospective investor may not rely on SpareBank when making determinations in relation to these matters. By accepting this document you acknowledge that (a) SpareBank is not in the business of providing (and you are not relying on SpareBank for) legal, tax or accounting risks associated with notes in this document, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice, and (d) you should appraise senior management in your organisation as to such legal, tax and accounting advice (and risks associated with the notes) and this disclaimer to these matters. 2

3 Disclaimer continued This presentation includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms anticipates, believes, estimates, expects, aims, continues, intends, may, plans, considers, projects, should or will, or in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places and include, but are not limited to, statements regarding SpareBank s intentions, beliefs or current expectations concerning, amongst other things, results of operations, financial positions, prospects, growth, strategies and expectations of the banking industry and Norwegian mortgage market. By their nature, forward-looking statements involve risk and uncertainty, because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance, and the actual results, performance, achievements or industry results of SpareBank s and its group s operations, results of operations, financial position and the development of the markets and the industry in which they operate or are likely to operate ant their respective operations may differ materially from those described in, or suggested by, the forward-looking statements contained in this presentation. In addition, even if the operations, results of operations, financial position and the development of the markets and the industry in which SpareBank and its group operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results of developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, process in the residential mortgage industry, changes in regulation, currency fluctuations. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this document reflect SpareBank s and its group s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumption relating to SpareBank s financial position, prospects, operations, results of operations, growth, strategy and expectations of the residential mortgage industry. Any forward-looking statement speaks only as of the date on which it is made. New factors will emerge in the future, and it is not possible for SpareBank to predict which factors they will be. In addition, SpareBank cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statements. Although the statements of fact in this presentation have been obtained from, and are based upon, sources that SpareBank believes to be reliable, no representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The information contained in this document has not been independently verified. All opinions and estimates included in this presentation constitute SpareBank s judgement, as of the date of this presentation and are subject to change without notice and SpareBank is not under any obligation to update or keep current the information contained herein. None of SpareBank 1 Næringskreditt AS or any of its respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document or its contents, or otherwise arising in connection with this presentation. This presentation is confidential and is the property of SpareBank. 3

4 Content Overview Norwegian economic overview Low unemployment, large current account and government budget surpluses 600 bn sovereign wealth fund and 5 mill population Real Estate Market Increasing demand for commercial space due to high employment Commercial properties are located in the largest Norwegian cities, especially in Oslo and surroundings The SpareBank 1 Alliance 15 savings banks which together are Norway s 2 nd largest financial institution (single A rated banks) Retail focus, only operating in Norway SpareBank 1 Næringskreditt Aa1 rated covered bonds backed by high quality Norwegian commercial mortgages originated by the SpareBank 1 Alliance Norwegian Covered Bond Legislation Special banking principle for covered bond issuance Typical covered bond detailed framework 4

5 5 Norwegian Economic Overview

6 Norway Key Characteristics Tromsø Geography: m 2 mainland area Trondheim 4,6% agriculture and populated area 95,4% mountains, highlands, lakes Bergen Oslo Stavanger Kristiansand Demographics: 5,0 million population 2,3 million households Fertility rate: year pop CAGR: 1,2% Government and Affiliations Parliamentary Constitutional Monarchy Non-EU member (EEA member) Currency: ca. 8.3 NOK/EUR, 6 NOK/USD) Number 1 rank on the UN s Global Human Development Index since over a decade Household debt: Number of households with debt (2012): 83% Average HH debt (2012): NOK Average gross income per HH (2012): NOK HH debt multiple of gross income (2012): 1.58x 6 Source: Eurostat and Statistics Norway

7 Norwegian Economy Economic Indicators (%) E 2014P GDP growth - mainland Household consumption growth Investment growth mainland* Investment growth oil & gas Inflation rate, CPI month NIBOR rate / avg. mortgage rate 2.5/ / / / / /4.2 Household savings ratio Unemployment rate HH sector disp. real inc. growth Current Account Surplus / GDP Gov Budget Surplus / GDP Sovereign Wealth Fund / GDP Sources: Statistics Norway, NBIM, Norwegian Ministry of Finance as of March 11, 2014 * Business, residential housing and public sector investments 7

8 Norwegian Economy international context Unemployment rates Household real net disp. income chg GDP growth rates Household savings rates 8 Source: OECD Economic Outlook no.94 and Statistics Norway

9 Norwegian Economy Government Projected Budgets and Debt as a share of GDP The large and persistent Norwegian government budget surpluses have created a substantial financial cushion for the State. 9 Source: OECD Economic Outlook no. 94

10 Norwegian Economy GDP by Industry, Source: Statistics Norway, value added at basic prices (excl. taxes). Industrial includes fish (salmon) production

11 Norwegian Economy Exports, % of GDP 11 Source: Statistics Norway

12 Norwegian Economy Norwegian GDP, Main Components (1) Includes pipelines Real estate investment relatively moderate 12 Source: Statistics Norway

13 Norwegian Economy The market view; 5 year Sovereign CDS levels 13 Source: Bloomberg, monthly prices, as of February 2014

14 14 Commercial Property Markets

15 Real Market Value of Office Premises in Oslo Oslo office building stock is 8,3 mill m 2 CBD is approximately 3,2 mill m 2 Major redevelopment in Oslo last 5 years Especially around «Bjørvika», close to Oslo Sentral Station Urban redevelopment with increasing mix og residential and commercial space Prices deflated by Norwegian GDP deflator 15 Source: Norges Bank s Financial Stability Report

16 Office space rent levels according to centrality CBD = Central Business District 16 Source: Akershus Eiendom; The Norwegian Commercial Property Market, Autumn 2013

17 Rent Levels - Development in Oslo Growth in Real Rental Prices, Dec = 100 Rental Price Index (RPI) is deflated by Norwegian GDP deflator 17 Sources: Akershus Eiendom; The Norwegian Commercial Property Market Autumn 2013, Statistics Norway

18 Rent Levels - Development in Large City Markets Growth in Real Rental Prices, Dec = 100 Rental Price Index (RPI) is deflated by Norwegian GDP deflator 18 Sources: Akershus Eiendom; The Norwegian Commercial Property Market Autumn 2013, Statistics Norway

19 Office Vacancy: Oslo 19 Source: Akershus Eiendom; The Norwegian Commercial Property Market, Autumn 2013

20 Office Vacancy: Large Cities Outside of Oslo Office Vacancy Development in Stavanger is different from Bergen and Trondheim More liquid market Higher activity in building and rehabilitation Transaction volume significanty larger 20 Source: Akershus Eiendom; The Norwegian Commercial Property Market, Autumn 2013

21 The Sparebank 1 Alliance Covered Bond Issuer Parent Banks 21

22 SpareBank 1 - Alliance Strong alliance of Norwegian retail banks Founded Economies of Scale - key banks in the Alliance trace their history back to the 1820 s Tromsø Local presence Norway s most extensive branch network with 350 branches 2nd largest mortgage lender in the Norwegian Retail Market Trondheim Bergen Oslo Stavanger Kristiansand SpareBank 1 Hedmark SpareBank 1 SNN SpareBank 1 SMN SpareBank 1 SR SpareBank 1 Samspar SpareBank 1 Oslo Market leader in its local markets - The neighbourhood bank with market shares from 30-50% Approx two thirds are retail lending - Rest is SME lending Sr. Unsec. Ratings Fitch Moody s SpareBank 1 SR A- / F2 A2 / P-1 SpareBank 1 SMN A- / F2 A2 / P-1 SpareBank 1 SNN A / F1 A2 / P-1 Sparebank 1 Hedmark n/a A2 / P-1 22

23 SpareBank 1 Banks: Northern Norway SpareBank 1 Tourism Abundant natural resources Nord-Norge City of Tromsø Northern Norway represents about 35% of the Norwegian mainland and approximately 9.4% of the population. Northern Norway is often described as the land of the midnight sun and the northern lights. It is by far the most dramatic Norwegian region from a nature perspective. Outside the Islands of Lofoten are the richest cod fishing grounds in Europe. Northern Norway and the Arctic holds the most promising aspects for the long-term future of Norway s oil and gas industry. SpareBank 1 Nord Norge (or short SNN) is headquartered in the city of Tromsø and has 75 branches throughout Northern Norway. Other than a significant retail banking presence, industries are fishing, oil and gas exploration and production moving north, mining and minerals, construction and tourism. The public sector is also a meaningful employer in this part of Norway. 23

24 SpareBank 1 Banks: Central Norway SpareBank 1 SMN City of Trondheim Salmon farming The Norwegian University of Science and Technology This region s consists of three counties (North and south Trøndelag and Møre and Romsdal) and the population is nearly 700,000 people or 13.8% of the Norwegian total. The town of Trondheim is an old Norwegian capital and has played a key role in Norwegian history. The renowned Norwegian University of Science and Technology is located here. SpareBank 1 SMN (or short SMN) is based in the town of Trondheim and over 50 branches are maintained throughout the region. SMN is the region s leading retail bank by market share. Within the corporate sector the most important activities of the bank is in commercial real estate, transportation and related services, maritime and offshore, seafarming, agriculture and forestry as well as other traditional manufacturing, construction and leisure industries. 24

25 SpareBank 1 Banks: Southwest Norway Fjords and Coastline 2 nd largest city: Bergen SpareBank 1 SR-Bank Oil & gas production in the North Sea Approximately 24% of Norway s population live in the region, and it is also here that the population growth has been patricularly strong. SpareBank 1 SR-Bank (short SR-Bank) s home market are both in the Western and Southern (the Skagerak coastline) Norwegian regions. The bank, which home base is in Stavanger and is Norway s 2 nd largest Norwegian owned bank, maintains approximately 50 branches in its region. The dominating industry is oil and gas, but the region is also an important food producer and in Stavanger, finance and investments has also become a significant factor. The bank maintains the largest market share in the retail segment of all banks active in the region. Within the corporate segment, the largest exposures are to commercial real estate, service based businesses, pipelines and other transportation, agriculture and forestry, hydroelectric power, construction, minerals and mining. 25

26 SpareBank 1 Banks: Eastern Norway Sparebanken Hedmark Oslo: administrative, cultural, financial capital Agriculture in Eastern Norway 11 Other SpareBank 1 Banks The Royal Palace, Oslo Eastern Norway is by far the most populous region of Norway with approximately 50% of the overall Norwegian population. It also contains Oslo, which is both a county and a municipality. Oslo is Norway's most populous city and Norway s administrative, cultural and financial capital. Sparebanken Hedmark is headquartered in Hamar, to the north of the capital, and it maintains 28 bank branches Samarbeidende Sparebanker (short Samspar) is a group of 11 smaller savings banks in Eastern Norway. These banks are also predominantly retail (mortgage) banks with some SME corporate exposure, including commercial mortgages and represent approximately 20% of the Alliance by assets. SpareBank 1 Oslo covers the capital and surroundings with 18 branches. 26

27 SpareBank 1 - Alliance Structure SpareBank 1 SR-Bank SpareBank 1 SMN SpareBank 1 Nord-Norge Sparebanken Hedmark 11 Smaller SpareBank 1 Banks Products, Commissions, Dividends Sales, Loans, Portfolios, Capital Covered Bonds Insurance (Life and Casualty) Asset Management Markets Factoring / Collection Credit Cards Banking Cooperation The SpareBank 1 Banks coordinate: Brand Building/Marketing, IT Operations and Systems Development, Risk Management and modelling, Centres of Excellence 27

28 SpareBank 1 - Alliance Second largest lender in Norway 28 Source: Banks annual reports and own estimates, NBIM, Statistics Norway

29 SpareBank 1 - Alliance Composition of lending book by sectors across all banks Total lending approximately NOK 575 bn Mortgages approximately NOK 400 bn Share of mortgages bought by SpareBank 1 Boligkreditt: ca. 42% 29 Source: All Sparebank 1 alliance banks, incl. covered bond issuer SpB1 Boligkreditt * Weighted avg. four largest Sparebank 1 banks

30 SpareBank 1 - Alliance Sound Performance in the SpareBank 1 banks 30 Source: Sparebank 1 banks financial reports December 31, 2013 (SR, SMN, SNN and Hedmark) * SR, SMN, SNN only ** Excludes all loans transferred to Boligkreditt which have zero individual loss provisions

31 SpareBank 1 - Alliance Sound Performance in the SpareBank 1 banks SpB1: Average for the period: 14.8% Nordic Banks: average for the period: 13.4% 31 Source: Sparebank 1 banks annual reports (SR, SMN, SNN and Hedmark) * Excludes income from financial investments

32 SpareBank 1 - Alliance Equity in Nordic Banks Norwegian Banks must adhere to a definition of the transitional floor which sets a minimum for risk weighted assets which the CET1 calculation is based upon: 80% of the RWA according to Basel I. Consequently reported CET 1 ratios in Norway (green bars) are lower than in Sweden (blue bars) SpareBank 1 banks The absolute capitalization of Norwegian banks is higher than for Swedish banks The main reason is a lower risk weight for mortgages in Sweden (in Pillar 1): 15% The main difference between SpareBank 1 and DNB is that SpareBank 1 employs the standard method for corporate risk weighting (and not IRB) 32 Source: Banks quarterly reports

33 Regulatory Developments Mortgage Market and Capital Requirements Risk weighting for banks mortgage lending o New mortgage risk weight proposals approximately 20-25% (i.e. doubling of LGD to 20%) o Currently there is a transitional floor which means that Boligkreditt risk weights mortgages at essentially 40% (80% of the total Basel I risk weighted assets) Capital requirements proposals (Norges Bank to advise on the countercyclical buffer): 9% Core Tier 1 requirement in effect from July 2012 in accordance with EU regulation 33

34 SpareBank 1 Næringskreditt Covered Bond Issuer Structure Cover pool details 34

35 Næringskreditt Structure and Cover Pool Loan Transfer SpareBank 1 SR-Bank SpareBank 1 SMN SpareBank 1 Nord-Norge Sparebanken Hedmark Other SpareBank 1 Banks 24.1% 29.7% 17.8% 2.9% 25.5% Ownership shares as of Eligibility Criteria Filter (see next page) Mortgage Loan Mortgage Loan Mortgage Loan Cover Bond Issuer decides timing of loan purchase True sale of loans SpareBank 1 Næringskreditt Specialist Bank (Covered Bond Issuer 35

36 The Commercial Mortgage Origination Process - identical amongst the SpareBank 1 banks Initial Customer Contact and Identification of Customer needs Analysis and Assessment of Collateral and Cash Flow, Rating and Classification Credit committee Decision, Pricing and Loan Contract Preliminary assessment of customer, customer s need and collateral against credit strategy and policy Collection of Customer information and financial information Company, owners and management Description of project and debtor Debt Servicing Capacity (cash flow analysis) Analysis of condition, location, tenantry, market terms, Sector Analysis Final decision on LTV, maturity and covenants Pricing based on internal pricing model Legally binding contract Cash flow and debt servicing capacity are key criterias for evaluating an application Cashflow analysis is performed using the SpareBank 1 Credit Scoring Model (the existing rental cash flow stream is stressed by simulation of market variables: rent levels, interest rates, vacancy rates in a monte carlo model) Assessment of type of property, sector, location etc. against strategy and credit policy Experience with management of the project and the borrower s ability and willingness to further support the project financially Customer past behavior also weigh heavily in credit scoring model 36

37 Næringskreditt Underwriting Eligibility Criteria's for the Cover Pool General Criteria Other Criterias Solvency criteria: - Risk category A-F, PD 2,5% - Expected loss < 0,20% Collateral: - The mortgage must be within 60 % of the property s market value Geography - Well functioning markets Sectors (tenants) Offices Retail/shopping centres Hotels Logistical facilities/warehouses - Housing/multifamily Type of products: Mortgages with floating interest rates, both serial loans and annuity loans Loan size > NOK 10mn Size of loan < 5% of total portfolio Size restrictions according to capital adequacy 20 largest exposures < 50 % of total portfolio No missed payments last 12 months Valuation Purchase price External valuation Independent internal valuation based on cash flow valuation model (rental contracts) Credit Committee Larger exposures, weaker ratings requires cover bond issuer credit committee approval Constituents are commercial property experts in member banks: additional quality control after origination 37

38 Næringskreditt Credit Committee All loan exposures are approved at credit committee in the underwriting bank When seeking to approve the loan for the commercial cover bond issuer, loans go through committee again The Næringskreditt committee consists of commercial property experts from the shareholder banks. Voting on individual exposures always excludes the representative whose bank is seeking to sell the mortgage loan on to Næringskreditt Criteria for SPACOM credit committee evaluation of cases: Risk Class Probability of Default Exposure at Default A-B 0,00 % - 0,25 % > 25 million C-E 0,25 % - 1,25 % > 12 million F 1,25 % 2,5 % > 6 million Total LTV 90 % (loans at parent bank and Næringskreditt combined) Hotels Shopping centres 38

39 Næringskreditt Balance sheet as of year-end 2013 Cash deposits (2.3%) Gov t T-bills(0.2%) 75.3% Covered bonds issued (Aa2 rating) Commercial mortgages 96.6% Derivatives and other liabilities (0.2%) Unsecured debt (10.2%) Derivatives (0.9%) Hybrid T1 / LT2 (3.3%) Equity (11.0%) ASSETS LIABILITIES Legal requirement: cover pool assets > liabilities with a preferential claim (cover bonds) 39

40 Næringskreditt Support structure SpareBank 1 Banks Have the following obligations to the covered bond issuer: Ongoing equity support: Pay in additional equity capital if needed (joint and several commitment) Liquidity support: Purchase covered bonds due to be refinanced if market access not present (joint and several commitment) Guarantee a minimum yield on mortgages sold to Næringskreditt of 20 bps Maintain a sufficient volume of qualifying loans Provide sufficient levels of unsecured debt (in addition to paid in equity) in order to achieve the targeted overcollateralization SpareBank 1 Næringskreditt Covered Bond Issuer 40 The details of the support arrangements are identical to Boligkreditt with the exception of the guaranteed loan margin

41 Covered Bond Issuer and Cover Pool Losses on Commercial Mortgages Bank level experience with commercial mortgages and max LTV of 80% 0.60% 0.50% 0.40% 0.43% No impairments or losses in cover pool historically 0.30% 0.20% 0.29% 0.35% 0.17% No loans in arrears as per Q % 0.00% Norwegian Banking Crisis Loss % WAvg 0.08% Less than 10 loans in arrears above 30 days during last 3 years 41

42 Næringskreditt Cover Pool Data as per Q Rated Aa1 by Moody s Assets / Status Number of borrowers/volume Average Loan Balance Weigthed Average Current LTV 100% commercial mortgages on Norwegian commercial properties / 100% performing loans 319/ NOK 15.7 billion NOK 34,258,763 (approximately 4 million / $ 5 million) 46.4 % Weighted Average Seasoning 3.6 years Weighted Average Remaining Term 19.1 years Interest Tyoe 100% floating rate Regional Distribution Oslo 33%, Akershus 25%, Sør-Trøndelag 11%, Rogaland 6% Current OC 27.3% 42 Source: Cover pool report, data as of March 31, 2014

43 Covered Bond Issuer and Cover Pool Mortgage Portfolio Overview LTVs and Loan Size Current LTV distribution Distribution by loan size The collateral (commercial properties) is revaluated every 12 months Valuation by independent party Loans which rise above 60% LTV as a result of the revaluation stay in the cover pool, but the share of the loan above 60% is disregarded for asset liability testing 43 Source: Cover pool report, data as of March 31, 2014

44 Covered Bond Issuer and Cover Pool Strong focus on the largest cities in Norway Bergen Norway s 2nd largest city 270,000 inhabitants Norway s hub for aquaculture, offshore petroleum industry and subsea technology Trondheim Norway s 3rd largest city 180,000 inhabitants Norway s capital of technology, educating 80 % of all engineers going into the oil, technology and IT-industry Stavanger Norway s 4th largest city 130,000 inhabitants The petroleum capital of Norway, hosting the local offices of multinational oil majors An important R&D hub for oil & gas technology Oslo Noway s capital and largest city 630,000 inhabitants Oslo is the economic and governmental centre of Norway. The national hub for trade, banking, industry and shipping The metropoitan area of Oslo has a population of 1,5 million 44

45 Covered Bond Issuer and Cover Pool Type of Dwellings and Repayment Method Mortgage loans by type of property (volume) Volume and number of loans by repayment method Volume and number of loans in each maturity bucket Offices represent the majority of the portfolio SB1NK has no industrial production facilities in the cover pool Loans to housing associations are included in multifamily category Average loan size approx NOK 34 mill Few large loans (<20% of total above NOK 200 mill) 45 Source: Cover pool report, data as of March 31, 2014

46 Example: Commercial Real Estate in the Cover Pool Hotel Properties in Oslo City Centre Debtor and loan data Property factsheet Property factsheet Total loan size (NOK mn): 143 Total area 5,609 sqm Total area 5,158 sqm Cover pool loan size (NOK mn): 108 Total LTV: 61% Cover pool LTV: 47% Risk class Probability of default (1yr): 1.0% Maturity date: 07/2042 Amortisation profile: E 33 yr fully amortising straight line basis 65 rooms 12mth net rent NOK 8,8 mn Maturity date 12/2026 Market value NOK 124,4 mn Valutation date 11/2013 Year built (refurbished) 2008 (2012) 114 rooms 12mth net rent NOK 7,8 mn Maturity date 04/2030 Market value NOK 110,5 mn Valutation date 11/2013 Year built (refurbished) 1997 (2011) 46

47 Example: Commercial Real Estate in the Cover Pool Combined Warehouse and Office Premises in Stavanger Debtor and loan data Tenant information Property factsheet Total loan size (NOK mn): 195 Cover pool loan size (NOK mn): 90 Total LTV: 78% Cover pool LTV: 36% Risk class Probability of default (1yr): 1.2% Maturity date: 10/2022 Amortisation profile: E 10yr partial bullet 18yr amortisation plan IT-solutions and operations provider Oil & Gas Company Building systems,and services provider Office premises 3,003 sqm until 03/2023 Parking space 1,781 sqm until 12/2022 Warehouse 3,785 sqm until 09/2022 Warehouse 1,812 sqm until 12/2022 Total size 12mth net rent Market value sqm Warehouse 5,597 Office premises 3,002 Parking space 1,781 NOK 16.3mn NOK 250 mn Valuation date 01/2014 Year built (refurbished)

48 Example: Commercial Real Estate in the Cover Pool Office Premises in Oslo City Centre Debtor and loan data Tenant information Property factsheet Total loan size (NOK mn): 104 Cover pool loan size (NOK mn): 75 Total LTV: 76% Cover pool LTV: 55% Risk class Probability of default (1yr): 1.0% Maturity date: 04/2039 Amortisation profile: E 26yr fully amortising straight line basis Gov t Administration Other private sector tenants Office premises 4,135, sqm until 02/2020 Storage 293 sqm until 02/2020 Parking space 1,518 sqm until 02/2020 Office premises 725 sqm until 05/2016 Storage 65 sqm until 05/2016 Total size 12mth net rent Market value 6,736 sqm Office premises 4,860 Parking space 1,518 Storage space 358 NOK 9,5 mn NOK 136,4 mn Valuation date 02/2014 Year built (refurbished) 2000 Vacancy rate 0% 48

49 Example: Commercial Real Estate in the Cover Pool Office Premises in Trondheim City Centre Debtor and loan data Tenant information Property factsheet Total loan size (NOK mn): 79 Cover pool loan size (NOK mn): 65 Total LTV: 67% Cover pool LTV: 56% Risk class Probability of default (1yr): 0.05% Maturity date: 12/2021 A Financial Institution Real Estate Broker Insurance Company Other tenants Office premises 2,377, sqm until 06/2021 Office premises 344 sqm until 12/2016 Office premises 572 sqm until 05/2015 Office premises 825 sqm until 06/2021 Total size 12mth net rent Market value 4,118 sqm 100% Office premises NOK 7,4 mn NOK mn Valuation date 10/2013 Year built (refurbished) 1971 (2011) Amortisation profile: 10yr partial bullet 50yr amortisation plan Vacancy rate 0% 49

50 SpareBank 1 Næringskreditt Covered Bond Issuer Funding 50

51 Funding Strategy of the SpareBank 1 Alliance The SpareBank 1 Alliance has Issue Date Size (mn) Tenor (years) Maturity Spread at issue - a strong deposit base - access to senior unsecured capital markets funding (done individually by the Alliance banks) Covered bonds forms part of the core funding sources - Residential CB s through SpareBank 1 Boligkreditt (Aaa/AAA) - Commercial CB s through SpareBank 1 Næringskreditt (Aa1) - Domestic and international Issuance Access to public and private markets Extending the maturity profile - Diversifying the Investor Base The SpareBank 1 Alliance is committed to the covered bond market - Benchmark curves - Information transparency - Private placements gaining importance in the funding mix in the longer end of the curve Spacom NOK Covered Bond Issues outstanding NOK MS+bps 09/ ,5 09/ / ,0 05/ / ,0 06/ / ,7 06/ / ,5 06/ / ,2 06/ / ,2 06/ / ,4 06/ / ,2 06/ / / / ,5 06/ Spacom SEK Covered Bond Issues outstanding SEK MS+bps 08/ ,0 05/ / ,0 10/

52 SpareBank 1 Næringskreditt Maturity Profile 52 Maturities as of June 20, 2014

53 53 Norwegian Covered Bond Legislation

54 Source: Offering Circular dated August 2007 Norwegian Legal Framework for Covered Bonds Specialist banking principle LTV limits Assets Matching Requirement Special Supervision Over Collateralisation Liquidity Requirement Currency risk Interest rate risk Issuer Insolvency Only specialised institutions whose articles of association comply with prescribed mandatory requirements may issue covered bonds 75% for residential mortgages 60% for commercial mortgages The cover pool may consist of mortgaged real estate assets, public sector loans and substitute assets (max 20% of cover pool, 30% with NFSA approval) Value of the cover pool shall at all times exceed the value of the covered bonds with a preferential claim on the pool. NPV principle applied to all assets and liabilities. Supervised by the Financial Supervisory Authority of Norway (NFSA) NFSA appoints an independent inspector who regularly (at least every three months) supervises the matching requirement of the cover pool and the cover pool registry the Inspector submits annual reports of observations and assessments to the NFSA Voluntary OC is part of the pool and is bankruptcy remote Cash flow from the cover pool shall at all times suffice to cover payments on the covered bonds and payments to counterparties under related derivatives agreements. A liquidity reserve needs to be established which shall be included in the Cover Pool The credit institution must establish reasonable and conservative limits. SB1B fully hedges currency risk Interest rate risk must be analysed (rate curve shifts and twists). SB1B hedges interest rate risk on its bonds to 3 month NIBOR Bankruptcy Administrator tasked with preserving the value of the cover pool, maintain law & regulations, ensure timely payment to covered bond investors and derivatives counterparties Must inform covered bond investors about any material decisions If timely payments can no longer be ensured, a halt to payments is introduced. All covered bond investors have preferential pari passu claim, must be consulted on material points 54

55 Comparison of Covered Bond Jurisdictions Country Max LTVs Special Banking Principle NPV Asset Liability Matching Freq. Of Coverage Calculation Legally required O/C Derivatives Pledged to Pool Separate Administrator in Insolvency Voluntary O/C protected in Bankruptcy Norway Resi: 75% CRE: 60% Sweden Resi: 75% CRE: 60% Finland Resi: 70% CRE: 60% Germany Resi: 60% CRE: 60% Yes Yes Daily No Yes Yes Yes No Yes Daily No Yes Yes Yes No Yes Daily Contractual Yes Yes Yes No Yes Daily 2% Yes Yes Yes Spain Resi: 80% CRE: 60% No No Daily CH 25%/ CT 43% Yes Yes Yes France Resi: 80% CRE: 60% Yes No Daily 2% Yes Yes Yes Netherlands Resi: 80% No No Monthly Contractual Yes Yes Yes Italy Resi: 80% CRE: 60% No Yes Six months No Yes No Yes UK Resi: 80% No Not relevant Not relevant Contractual Yes Yes Yes 55 Sources: Euroweek and The Cover

56 SpareBank 1 Næringskreditt Contact Details Arve Austestad, Chief Executive Officer Direct Telephone: Fax: arve.austestad@sparebank1.no Eivind Hegelstad, COO, Investor Relations Direct Telephone: Fax: eivind.hegelstad@sparebank1.no Carl Fredrik Hjelle, Risk Manager Direct Telephone: Fax: carl.hjelle@sparebank1.no Further information and statistics regarding Cover Pool and Cover Bond Issuer: Henning Nilsen, Director, Head of Finance & Risk, Direct Telephone: Mobile: henning.nilsen@sparebank1.no 56

57 57 APPENDIX

58 Nordic Yield Development, Office Premises 58 Source: Akershus Eiendom; The Norwegian Commercial Property Market, Autumn 2013

59 Næringskreditt Underwriting/Credit processes Cash Flow Simulation Model Simulated market data Qual itative factors Input Properties Contracts Obligor Loan etc Cash flow calcula - tion Default Func - tion Default Non default LGD calculation Output PD LGD CF info Values etc Monte Carlo Simulation of future cash flows for each project / company PD and LGD dependant increased PD will increase LGD The model is also a valuable source for portfolio information Rating performed by Business Unit Approval by Credit Committee 59

60 Cover Pool Details 60 Source: Cover pool report, data as of March 31, 2014

61 Cover Pool Details 61 Source: Cover pool report, data as of Dec 31, 2013

62 Cover Pool Details 62 Source: Cover pool report, data as of March 31, 2014

63 Cover Pool Details 63 Source: Cover pool report, data as of March 31, 2014

64 Cover Pool Details 64 Source: Cover pool report, data as of March 31, 2014

65 Cover Pool Details 65 Source: Cover pool report, data as of March 31, 2014