gjensidige.com fourth Quarter interim report AND Gjensidige bank konsern Gjensidige bank ASa

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1 gjensidige.com fourth Quarter interim report AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010 Gjensidige bank konsern Gjensidige bank ASa

2 GJENSIDIGE BANK GROUP HIGHLIGHTS fourth quarter 2010 Higher deposit-to-loan ratio Stronger growth in customer base The bank s Oslo office moved into shared premises with Gjensidige Forsikring at Sollerud The bank s customer service functions were brought together in Førde The bank s consumer loan portfolio was migrated to the Group s joint customer and loan system PROFIT/LOSS 4Q 2010 COMPARED WITH 4Q 2009 Gjensidige Bank Group Figures in NOK 1000 TOTAL ASSETS Gjensidige Bank Group Figures in NOK ,000 30,000 20,000 4Q YTD 14,000,000 12,000,000 10, ,000 10,000,000 8,000,000-20,000-30,000-40,000-50,000-60,000 6,000,000 4,000,000 2,000,000-70,000-80, Q Q Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

3 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS GJENSIDIGE BANK GROUP BUSINESS Gjensidige Bank was launched in 2007, with Online Retail Banking in Norway as its main area of business. The bank has offices in Førde and Oslo. The bank offers traditional banking products such as current accounts, savings products and secured and unsecured loans. Combining Online Retail Banking with a local presence gives the bank a unique position in comparison with other online banks. In autumn 2009 the bank acquired Citibank s Norwegian consumer finance business. This acquisition made the bank one of the biggest consumer finance providers in Norway. Gjensidige Bank cooperates with Sparebanken Sogn og Fjordane, which provides both technical banking and staff-related services. Distribution takes place via the group portal, and the group s 22 consultation offices with central locations throughout the country. The bank s products are also offered through its own customer service centre. The bank has agreements with Tekna, the Confederation of Vocational Unions (YS), the Norwegian Society of Engineers and Technologists (NITO) and the Norwegian Farmers and Smallholders Union (NBS) relating to the delivery of products and services to the organisations members. The bank s products form part of Gjensidige Forsikring s loyalty programme, which offers good deals on insurance products. Gjensidige Bank had 147 employees at the end of 2010, 132 of whom were permanent employees. Gjensidige Bank ASA is a wholly-owned subsidiary of Gjensidige Bank Holding AS, which in turn is a wholly-owned subsidiary of Gjensidige Forsikring ASA. Gjensidige Bank Boligkreditt AS is a wholly owned subsidiary of Gjensidige Bank ASA. The bank has access to financing with covered bonds via Gjensidige Bank Boligkreditt AS. The quarterly reports are consolidated and comprise Gjensidige Bank AS and Gjensidige Bank Boligkreditt AS. MARKETING AND GROWTH IN Customer BASE At the end of the fourth quarter, the bank had 89,594 customers, 5,303 more than at the start of the quarter. The customer base grew faster in the fourth quarter than in previous quarters of 2010, which was due to factors such as the launch of a new high-interest account in the third quarter, higher turnover in consumer finance and the introduction of BankID. Through association with the Gjensidige brand, customer base and distribution system, the bank differentiates itself from other players in the market. In the fourth quarter the bank mainly focused on targeting the Group s own customers through direct marketing. The bank s consumer loans have been advertised on the Internet and on TV. 49% of customers are interested in or hold other products and services related to banking and insurance. PROFIT PERFORMANCE Profit before tax was NOK 3.7 million in the fourth quarter, compared with a loss of NOK 21.4 million for the corresponding period in This implies an improvement in earnings of NOK 25.1 million. The preliminary financial statements for 2010 show a profit before tax of NOK 33.1 million, compared with a loss of NOK 76.3 million in This implies an improvement in earnings of NOK million. The main reason for the improvement in earnings is increased income and better operating margins. Following the acquisition of Citibank s consumer finance business in autumn 2009, a significant proportion of the bank s loan portfolio consists of unsecured loans and advances, which has also helped to boost earnings. Given that Online Retail Banking is still in a development phase, the profit performance is in keeping with expectations. NET INTEREST AND CREDIT Commission INCOME Net interest income for the quarter amounted to NOK million, compared with NOK 25.1 million for the corresponding quarter in This implies an improvement of NOK 78.3 million. The preliminary financial statements for 2010 show net interest income of NOK million, a significant increase over 2009, when net interest income amounted to NOK 57.5 million. This is an increase of NOK million. The bank s net interest margin was 2.88 per cent in 2010, compared with 0.63 per cent in The main reasons for the growth in net interest income were higher volumes and higher margins. OPERATING EXPENSES Operating expenses for the quarter amounted to NOK 83.4 million, compared with NOK 49.7 million for the corresponding quarter in This implies an increase in costs of NOK 33.6 million. In the fourth quarter the bank incurred extra costs in conjunction with its relocation and the migration of its consumer finance portfolio to the Group s joint customer and loan system. The preliminary financial statements for 2010 show total operating expenses of NOK million, up from NOK Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

4 million in This implies an increase in costs of NOK million. The increase was a result of the bank having more staff and a larger organisation, as well as the integration costs following the acquisition of the Citibank consumer finance business. DEFAULT OF AND LOSS ON LENDING The bank recognised an expense of NOK 27.6 million from write-downs of loans in the quarter, compared with income of NOK 0.6 million in the corresponding quarter in The deterioration was mainly due to group write-downs on unsecured personal loans. The reason for the deterioration in relation to the corresponding quarter in 2009 is that the portfolio of unsecured loans was taken over so late in 2009 that no losses were recognised against it that year. The preliminary financial statements for 2010 show an expense of NOK million from write-downs of loans, compared with NOK 3 million in Realised losses amounted to NOK 7.5 million. Total write-downs at 31 December 2010 amounted to NOK million. The increase from 2009 to 2010 was mainly due to the portfolio of unsecured loans. Loans in default over 30 days amounted to NOK at the close of the quarter. This was NOK 38.5 million more than at the end of the third quarter. The increase in defaults mainly related to the unsecured portfolio. Unsecured loans that default are collectively assessed. The outstanding loan balance, less expected discounted cash flows from customer repayments, is recognised under group writedowns. A loss is realised when it is overwhelmingly probable that a loan will not be repaid. The bank considers loan performance to be satisfactory. CUSTOMER LOANS At the end of 2010, gross loans amounted to NOK 14,119.5 million, compared with 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 NOK 11,575.6 million at the end of This implies an increase of NOK 2,543.9 million over the past twelve months. The growth in lending for the quarter totalled NOK million. The lending mainly consists of loans with adjustable interest rates. The bank lends only to consumers and agricultural customers. At the end of the quarter, 77.6 per cent of the bank s exposure to customer lending was secured by mortgages. The average loan commitment in the mortgage portfolio is just under NOK 1 million. There is no single exposure over NOK 10 million. CUSTOMER DEPOSITS Customer deposits amounted to NOK 9,120.0 million at the end of the quarter, compared with NOK 6,550.4 million a year earlier. This constituted an increase of NOK 2,569.6 million in customer deposits over the past twelve months. Growth in deposits for the quarter totalled NOK 1,222.7 million. A new high-interest product helped to boost growth in deposits. The deposit-to-loan ratio at the end of the quarter was 64.6 per cent, compared with 56.6 per a year earlier. 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 09 Q1 09 Q2 09 Q2 09 Q3 09 Q3 09 Q4 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 10 Q2 10 Q3 10 Q4 10 Quarter-on-quarter, the deposit-to-loan ratio rose from 58.2 per cent to 64.6 per cent. SEGMENTs The bank s main target group is the private customer segment. This segment comprises organisation customers, benefit customers, agricultural customers, employees in the Gjensidige Group and other customers. Since the second quarter, the bank has been offering a deposit product aimed specially at the corporate market. The bank s customers are spread throughout Norway. CAPITAL ADEQUACY At the end of the quarter, the Group had a capital adequacy ratio of 16.1 per cent, compared with 17.8 per cent a year earlier. The decline in capital adequacy was expected, and was chiefly attributable to the growth in lending. At the end of the quarter, net equity and subordinated loan capital amounted to NOK 1,226.3 million. The bank aims to have a capital adequacy ratio of at least 12 per cent. DEBT SECURITIES ISSUED Net issues of debt securities amounted to NOK 4,763.1 million at the end of the quarter, compared with NOK 4,366.7 million a year earlier. At the end of the third quarter of 2010, net issues of debt securities amounted to NOK 4,783.7 million, which implies a decrease in issues of debt securities of NOK 20.6 million in the fourth quarter. Of the NOK 4,763.1 million of net issues of debt securities, NOK 1,164.8 million mature over the next 12 months. Gjensidige Bank ASA has a reserve of covered bonds totalling NOK 750 million issued by Gjensidige Bank Boligkreditt AS. Of this reserve, NOK million is utilised in the swap arrangement with Norges Bank (the central bank of Norway). The swap arrangement has provided the Group with NOK million in liquid treasury bills. 4 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

5 LIQUIDITY At the end of the quarter, the Gjensidige Bank Group had net liquid assets worth NOK 1,816.1 million divided between NOK million in bank deposits and NOK million in bonds, certificates and money market funds. NOK million of this were investments in covered bonds from Gjensidige Bank Boligkreditt AS (eliminated in the consolidated accounts) that were not utilised in the swap arrangement with Norges Bank. Some of these assets are listed on the Oslo Alternative Bond Market (ABM). The net liquid assets are sufficient to cover the debt payments that will fall due for the next 19 months. KEY RISK AND UNCERTAINTY FACTORS FINANCIAL RISK The bank s financial risk mainly comprises credit, liquidity and interest rate risk. Risk is reported monthly and is assessed in accordance with the principles, strategies and limits on risk adopted by the Board. Credit risk represents the risk of losses arising from customers and other counterparties failing to repay their debts when they are due. The bank uses risk classification models to calculate the risk associated with its exposure to customers. As a result of the bank now having a significant portfolio of consumer loans, losses have increased. This is in line with the bank s expectations, and with normal trends. The bank considers its loan performance to be satisfactory, and monitors its portfolio closely. Liquidity risk is the risk that the bank will be unable to meet all of its financial obligations when they are due, or be unable to fund its lending activities. Limits have been determined for the necessary access to liquid funds. In order to reduce the risk, liquidity forecasts are continuously updated. The bank also holds an adequate liquidity buffer, designed to give it sufficient time to implement necessary measures in the event of an acute liquidity freeze. Interest rate risk is the risk that equity will fall in value as a result of unexpected changes in general interest rate levels. Any such change in interest rate levels may lead to the market value of assets with fixed-interest periods falling. Alternatively, the market value of fixed-interest debt/liabilities may increase. The bank s exposure to general interest rate levels shall be kept low in relation to its core capital. EVENTS AFTER THE BALANCE SHEET DATE No significant events have occurred after the end of the period. OUTLOOK The integration of the new consumer finance business is nearing completion, and further synergies are expected in the future. The foundations are in place for continued growth. The Board strongly believes that the performance of Gjensidige Bank will be satisfactory going forward. Førde, 16. February 2011 bjørn Walle arvid Andenæs ingun Ranneberg-Nilsen Chairman of the Board deputy Chairman of the Board Marianne B. Einarsen britt Tjønneland jan Kaare Hellevang CEO Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

6 PROFIT & LOSS ACCOUNT AND BALANCE SHEET Gjensidige Bank Group Profit & loss account Figures in NOK 1,000 Notes Q Q Interest income etc. 209,679 90, , ,287 Interest costs etc. 106,316 65, , ,835 Net interest and credit commission income 103,362 25, ,017 57,452 Commission income and income from bank services 8,532 4,519 39,466 13,272 Commission costs and costs of bank services 1,275 1,152 4,665 3,806 Income from other financial investments (2,678) (648) (5,594) 7,028 Other operating income 6,790 (22) 8, Total income excluding net interest 11,369 2,697 37,547 16,531 Total income 114,731 27, ,564 73,983 Wages, salaries and general administration expenses 65,638 28, ,267 88,170 Depreciation of fixed assets 5,212 3,926 18,243 13,515 Other operating expenses 12,525 17,225 52,637 45,574 Total operating expenses 83,375 49, , ,259 Profit / (loss) before loan losses 31,357 (21,953) 142,417 (73,276) Write-down on loans 4 27,644 (595) 109,359 3,004 Profit / (loss) before tax expense 3,713 (21,358) 33,059 (76,280) Tax expense 251 (5,970) 8,468 (21,348) Profit / (loss) for the period 3,462 (15,388) 24,591 (54,932) Earnings per share (NOK ) (basic and diluted) 4.0 (21.1) 28.1 (75.1) BALANCE sheet Figures in NOK 1,000 Notes Assets Cash and claims from central banks 797, ,519 Loans to and claims from credit institutions 2 59, ,409 Loans to and claims from customers 4 14,119,485 11,575,604 - Write-downs (117,148) (15,301) Net loans to customers 14,002,337 11,560,303 Certificates, bonds and other interest-bearing 555, ,521 Shares (and other securities with variable yield) 241,636 88,026 Intangible assets 62,826 66,132 Fixed assets 4,414 5,244 Other assets 6,406 1,187 Advance payments and accrued income 33,941 20,493 Total assets 15,763,631 12,732,834 LIABILITIES Liabilities to credit institutions 513, ,108 Deposits and liabilities to customers ,004 6,550,441 Liabilities opened for the issue of securities ,068 4,366,725 Other liabilities 19,802 12,769 Accrued costs and advance payment of income 53,313 64,961 Provision for commitments and costs 8 4,417 12,537 Total liabilities ,712 11,520,541 EQUITY Share capital 876, ,000 Premium reserve 332, ,192 Other paid-in equity 73,780 93,218 Other equity 7,946 (89,117) Total equity 1,289,918 1,212,293 Total liabilities and equity 15,763,631 12,732,834 6 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

7 Other components of the result Gjensidige Bank Group Figures in NOK 1,000 Q Q Profit for the period 3,462 (15,388) 24,591 (54,932) Other components of profit / loss Actuarial gains and loss on pensions (1,437) 525 Tax on other result components (51) (147) 402 (147) Total other profit / loss components (1,035) 378 TOTAL profit / loss FOR THE PERIOD 3,593 (15,010) 23,556 (54,553) STATEMENT OF CHANGES IN EQUITY Gjensidige Bank group Figures in NOK 1,000 SHARE CAPITAL Premium reserve Fund Other paid-in CCAPITAL Total paid-in CCAPITAL Other Equity The CCAPITAL Total Equity The CCAPITAL Equity , ,692 89, ,476 (90,170) 758,306 Capital expansion , , , ,500 Intragroup contrib. received (after tax) ,040 59,040 59,040 Profit for the period (55,606) (55,606) 675 (54,932) Other components of profit / loss Implementing pension liability Actuarial gains and loss on pensions Tax on other result components (147) (147) Total other profit/loss components Total profit / loss for the period (55,606) (55,606) 1,053 (54,553) Equity as of , ,192 93,218 1,301,410 (89,117) 1,212,293 Equity , ,192 93,218 1,301,410 (89,117) 1,212,293 Capital expansion Group contribution received (after tax) ,280 53,280 53,280 Share-based payment transactions settled in equity Profit for the period ,591 24,591 Other components of the profit / loss Implementing pension liability Actuarial gains and loss on pensions (1,437) (1,437) Tax on other result components Total other profit/loss components (1,035) (1,035) Result for the period ,556 23,556 To cover the uncovered losses (73,508) (73,508) 73,508 Equity as of , ,192 73,780 1,281,972 7,946 1,289,918 No. shares at end of period 876,000 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

8 STATEMENT OF CASH FLOW Gjensidige Bank group Figures in NOK 1, Operating activities Net payment of loans to customers (2,543,880) (4,864,210) Net payment of deposits by customers 2,569, ,070 Payment of interest from customers 731, ,248 Payment of interest to customers (208,077) (210,000) Net payment of interest from credit institutions etc. 6,631 9,417 Taxes paid (161) Net other commission income 35,677 7,412 Payment to operations (283,904) (133,896) Net paid/received upon purchase and sale of financial instruments (136,741) (318,265) and interest-bearing securities Net cash flow from operating activities 170,911 (4,786,224) Investment activities Net purchase of intangible assets and fixed assets (36,271) (17,364) Payments on purchase of subsidiary Net cash flow from investment activities (36,271) (17,364) Financing activities Net paid(-)/received when taking out loans from credit institutions 396, ,980 Net payment of interest on financing activities (146,098) (36,748) Net paid(-)/received for other short-term positions (15,799) 37,137 Paid-in equity 449,500 Net intragroup contribution/dividend received 74,000 82,000 Net cash flow from financing activities 308, ,869 Total cash flow 443,086 58,280 Cash flow for the period Liquid assets at start of period 413, ,648 Liquid assets at end of period 857, ,928 Net payment made(-)/received of cash 443,086 58,280 Specification of liquid assets Claims from central banks 797, ,519 Deposits with financial institutions 59, ,409 Liquid assets in statement of cash flow 857, ,928 The analysis of cash flow displays payments made and received of cash and cash equivalents throughout the year. The analysis has been adjusted for items which do not initiate cash flow, such as provisions, depreciation and write-down of loans and guarantees. Cash flow is classified as operating activities, investment activities or financing activities. The liquid assets are defined as cash and claims from central banks and loans to and claims from credit institutions. 8 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

9 NoteS Gjensidige Bank GRoup 1 ACCOUNTING POLICIES The Gjensidige Bank Group comprises Gjensidige Bank ASA and its subsidiary Gjensidige Bank Boligkreditt AS. The Group prepares its accounts in accordance with international financial reporting standards (IFRS) and the interim accounts for the fourth quarter have been prepared in accordance with IAS 34 - Interim reports. The accounting principles and calculation methods applied are the same as those utilised last year. For more detailed information on accounting principles, we refer to the annual report for 2009 for Gjensidige Bank ASA. Based on the assessments that have been made so far, the IFRSs and interpretation statements that have been issued up until 16 February 2011, the use of which is not mandatory as at 31 December 2010; i.e. IFRS 9, IFRIC 19, amendments to IAS 32, IFRIC 14 and the revised IAS 24, as well as improvements to IFRSs, are assumed to not have a significant effect on reported figures. Preparation of the interim accounts involves the use of assessments, estimates and assumptions that affect the use of accounting policies and recognised amounts for assets and liabilities, revenues and expenses. Actual results may deviate from these estimates. The most material assessments connected with the use of the company s accoun ting policies and the key sources of uncertainty in the estimates are the same in preparing the interim accounts as in the annual accounts for The Gjensidige Bank Group was established in the third quarter of 2009 with the establishment of Gjensidige Bank Boligkreditt AS. Share capital totals NOK 130 million and Gjensidige Bank ASA owns all shares. The company was established with the objective of taking over parts of the loan portfolio in Gjensidige Bank ASA with the aim of issuing covered bonds. All amounts are shown in NOK thousand unless otherwise indicated. Due to rounding differences, figures and percentages may not exactly add up to totals indicated. 2 SEGMENT INFORMATION Figures in NOK 1, Deposit from customers divided per sector and industry Employees etc. 9,120,004 7,897,256 7,156,986 6,702,886 6,550,442 6,364,371 6,455,654 6,242,810 6,131,371 Total deposits 9,120,004 7,897,256 7,156,986 6,702,886 6,550,442 6,364,371 6,455,654 6,242,810 6,131,371 Loans to customers divided per sector and industry Employees etc. 14,119,485 13,574,812 13,051,033 12,221,875 11,575,604 8,281,289 7,776,284 7,214,668 6,711,394 Gross loans 14,119,485 13,574,812 13,051,033 12,221,875 11,575,604 8,281,289 7,776,284 7,214,668 6,711,394 3 LIABILITIES ON THE ISSUE OF SECURITIES Nominal value Figures in NOK 1, Certificates and other short-term loans 1,050,000 2,475,000 Bonded debt 4,000,000 2,100,000 Own non-amortised certificates/bonds (285,000) (205,000) Total liabilities opened for the issue of securities 4,765,000 4,370,000 Maturity Remaining maturity (nominal value) Payable upon request Maximum 3 months 315, ,000 3 months - 1 year 850,000 1,875, years 3,525,000 2,000,000 More than 5 years 75,000 Total 4,765,000 4,370,000 New issues for the period 3,200,000 6,270,000 Repayment in the period 2,805,000 2,450,000 Sale by the Group as of ,050,000 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

10 4 Loss on loans and guarantees Figures in NOK 1, Change for the period in individual write-downs (131) 144 Change for the period in Group impairment 101,978 1,605 Confirmed loss for the period covered by previous write-downs 61 Confirmed loss for the period without previous indirect write-downs 7,599 1,255 Opening for the period with confirmed losses from previous periods (148) Loan losses for the period 109,359 3,004 Provision for loss on loans and guarantees Individual write-down at start of period Increase in ind. write-down of position where write-down has been made previously 56 - Reversal of ind. write-down from previous periods Write-down of position where ind. write-down has not been carried out previously Confirmed loss for the period where previous ind. write-down has been made 61 Individual write-down at end of period Confirmed loss for the period 7,660 1,235 Group write-down at the start of the period 14,485 12,880 + Change for the period in Group impairment 101,978 1,605 Group write-down at the end of the period 116,463 14,485 Total write-down at end of period 117,148 15,301 Defaulted positions and positions exposed to loss Defaulted loans Gross default over 30 days 1) 153,654 28,934 - individual write-down Net default loans 152,969 28,118 Loss severity 0.4 % 2.8 % Other positions exposed to loss Positions exposed to loss (not defaulted) - Individual write-downs Net other positions exposed to loss Loss severity 0 % 0 % 1) The figures as of are for gross default over 90 days. 5 CAPITAL ADEQUACY Figures in NOK 1,000 Subordinated loan capital Share capital and premium reserve fund 1,208,192 1,208,192 Other equity 80,936 4,101 Equity 1,289,128 1,212,293 Deduction Goodwill and other intangible assets (62,113) (43,254) Deferred tax asset (714) (22,878) Core capital 1,226,301 1,146,161 Supplementary capital Net equity and sub-ordinated loan capital 1,226,301 1,146, Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

11 5 CAPITAL ADEQUACY (cont.) Minimum requirement subordinated capital Credit risk: Institutions 1,078 2,390 Enterprises 1,557 8,343 Mass market positions 225, ,428 Positions secured by mortgage 331, ,917 Overdue positions 25,169 2,067 Covered bonds Shares in securities' fund 3,866 7,028 Other positions 446 1,188 Total minimum requirement credit risk 588, ,361 Operational risk 28,754 7,198 Deduction: Group write-down (9,317) (1,159) Minimum requirement equity and subordinated loan capital 608, ,400 Surplus subordinated capital 617, ,761 Basis of calculation balance sheet items not included in trading portfolio 6,442,452 5,616,358 Basis of calculation off balance sheet items not included in trading portfolio 917, ,575 Capital adequacy Capital adequacy ratio 16.1 % 17.8 % Core capital adequacy 16.1 % 17.8 % 6 CLOSELY RELATED PARTIES Gjensidige Forsikring ASA, Gjensidige Bank ASA and Gjensidige Bank Boligkreditt AS are considered to be closely related parties. All transactions and agreements with these parties are carried out in accordance with arm s length principles. Significant transactions with closely related parties as of 31 December 2010 are as follows: Gjensidige Bank ASA has purchased services from Gjensidige Forsikring ASA for NOK 22.6 million. At the time Gjensidige Bank Boligkreditt AS was established, an agreement was signed with Gjensidige Bank ASA regarding the provision of services relating to loan servicing and the running of the company. Furthermore, Gjensidige Bank Boligkreditt AS was granted a long-term credit facility of up to NOK 250 million, as well as short-term vendor financing of up to NOK 1.3 billion. The agreement on vendor financing was signed in May 2010 in conjunction with the transfer of customer loans with a face value of NOK 1.2 billion to Gjensidige Bank Boligkreditt AS, and the loan will be repaid as and when new covered bonds are issued. At 31 December 2010, NOK million of the facility was being used. As at 31 December 2010 the costs and interest relating to these agreements amounted to NOK 18.6 million. These items have been eliminated in the consolidated accounts. Gjensidige Bank ASA has invested NOK million in covered bonds issued by Gjensidige Bank Boligkreditt AS. The investment has been eliminated on the consolidated accounts against issued bond loans in Gjensidige Bank Boligkreditt AS. As of 31 December 2010, interest on bonds amounted to NOK 32.3 million and is eliminated on the consolidated accounts. As of 31 December 2010, Gjensidige Bank Boligkreditt AS has deposits with Gjensidige Bank ASA of NOK 45.8 million and interest totals NOK 1.4 million. Both items have been eliminated on the consolidated accounts. 7 CONTINGENT LIABILITIES AND SECURITY Figures in NOK 1, Loan commitment 1,549,478 1,366,502 Unutilised overdraft facility 1,693,799 1,211,712 Total contingent liabilities 3,243,277 2,578,214 Securities offered as security for loans/ overdraft facility in Norges Bank 756, ,090 Securities provided as security for the swap arrangement of treasury bills for covered bonds 586, ,559 Guarantee declaration Bankenes Sikringsfond 3,426 Total securities provided 1,346, ,649 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

12 8 Pensions Figures in NOK 1, Book pension commitment 4,417 12,537 In connection with the re-organisation of the early retirement pension schemes, the company has recognised income of NOK 2.54 million in the first quarter As part of the settlement transition for the acquisition of Citibank in December 2009, the company took over pension commitments for the employees from Citibank. The final commitment calculated turned out to be NOK 6.67 million lower than the initial estimate and this amount has been settled between the parties in the first quarter and has not had an impact on the company s result. New actuarial calculations were carried out in the fourth quarter, which estimated total pension commitments at NOK 4.42 million, compared with NOK 4.60 million at 30 September NOK 1.03 million has been charged to equity under actuarial gains and losses, while the remainder has been expensed as a pension cost. The pension commitments on the balance sheet relate to two senior managers. The bank s remaining employees are part of a defined contribution scheme. The accounts for the period have not been audited. 12 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

13 QUARTERLY EARNINGS PERFORMANCE GJENSIDIGE BANK GROUP Figures in NOK 1,000 Q Q Q Q Q Q Q Q Interest income etc. 209, , , ,177 90,945 64,823 76,706 90,813 Interest costs etc. 106, ,932 88,718 79,602 65,859 54,808 65,703 79,465 Net interest and credit commission income 103, , ,757 96,575 25,086 10,015 11,003 11,348 Commission income and income from bank services 8,532 10,976 10,098 9,859 4,519 3,262 2,844 2,647 Commission costs and costs of bank services 1,275 1,249 1,116 1,024 1, Income from other financial investments (2,678) (2,931) (129) 144 (648) 3,960 2,256 1,482 Other operating income 6, (22) 37 Total income 114, , , ,131 27, ,588 Salary and general administration costs 65,638 58,650 48,936 58,042 28,585 22,545 15,995 21,044 Depreciation of fixed assets 5,212 4,596 4,351 4,084 3,926 3,424 3,210 2,953 Other operating costs 12,525 11,478 12,537 16,097 17,225 9,000 9,225 10,124 Total operating costs 83,375 74,724 65,824 78,223 49,736 34,969 28,430 34,121 Result before loss 31,357 35,495 47,659 27,908 (21,953) (18,553) (13,235) (19,533) Write-down on loans (27,644) (21,396) (37,319) (23,000) 595 (2,592) (151) (856) Profit before tax for the period 3,713 14,098 10,340 4,908 (21,358) (21,145) (13,386) (20,389) The Gjensidige Bank Group was established in the third quarter of 2009 and figures for this period and the subsequent quarter are consolidated figures. The figures for the first and second quarter of 2009 apply to Gjensidige Bank ASA. KEY FIGURES GJENSIDIGE BANK GROUP Figures in NOK 1, Net interest as a percentage of average administration capital 1) % Loss costs as a percentage of gross loans % Return on equity annualised 2) % 2.64 (7.74) Deposit-to-loan ratio at the end of the period 3) % Capital adequacy 4) % Average assets under management NOK ,143,625 9,077,536 Average number of FTEs Number Registered customers at end of period Number 89,594 75,945 Registered customers who are also insurance customers at end of period Number 43,764 36,000 1) Net interest as per cent, annualised = net interest and credit commission income/average total assets 2) Return on equity, annualised = profit before tax / average equity during the period 3) Deposit-to-loan ratio = deposits as a percentage of gross lending 4) Capital adequacy = subordinated loan capital / basis of calculation for credit risk, market risk and operational risk Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

14 PROFIT & LOSS ACCOUNT AND BALANCE SHEET GJENSIDIGE BANK ASA PROFIT & LOSS ACCOUNT Figures in NOK 1,000 Q Q Interest income etc. 200,191 88, , ,423 Interest costs etc. 101,756 66, , ,075 Net interest and credit income 98,435 22, ,566 53,348 Commission income and income from bank services 8,507 4,519 39,405 13,272 Commission costs and costs of bank services 1,275 1,152 4,665 3,806 Income from other financial investments (2,678) (648) (5,594) 7,027 Other operating income 6,977 (276) 8, Total income excluding net interest 11,531 2,443 38,139 16,693 Total income 109,967 24, ,705 70,041 Wages, salaries and general administration expenses 64,991 28, ,418 88,170 Depreciation of fixed assets 5,051 3,766 17,601 13,301 Other operating expenses 11,830 15,881 50,691 44,003 Total operating expenses 81,872 48, , ,474 Profit / (loss) before loan losses 28,095 (23,754) 131,995 (75,433) Write-down on loans 27, ,037 1,773 Profit / (loss) before tax expense 451 (24,141) 22,958 (77,206) Tax expense (663) (6,759) 5,639 (21,610) Profit / loss after tax expense 1,115 (17,382) 17,319 (55,596) Result per share (NOK ) (basic and diluted) 1.3 (23.8) 19.8 (76.1) BALANCE SHEET Figures in NOK 1, ASSETS Cash and claims from central banks 797, ,519 Loans to and claims from credit institutions 515, ,848 Loans to and claims from customers 11,764,477 9,893,972 - Write-downs (115,596) (14,071) Net loans to customers 11,648,882 9,879,901 Certificates, bonds and other interest-bearing 1,303,958 2,077,521 Shares (and other securities with variable yield) 241,636 88,026 Ownership interest in group companies 130,030 80,030 Intangible assets 61,792 64,524 Fixed assets 4,414 5,244 Other assets 6,406 1,187 Advance payments and accrued income 38,985 19,401 Total assets , ,201 LIABILITIES Liabilities to credit institutions 558, ,147 Deposits and liabilities to customers 9,120, ,442 Liabilities opened for the issue of securities 3,716, ,725 Other liabilities 16,907 12,609 Accrued costs and advance payment of income 51,378 60,113 Provision for commitments and costs 4,417 12,537 Total liabilities 13,467, ,573 EQUITY Share capital 876, ,000 Premium reserve 332, ,192 Other paid-in equity 73,790 93,228 Other equity - (89,792) Total equity 1,281,982 1,211,628 Total liabilities and equity 14,749,716 12,782, Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 2010

15 Gjensidige bank FOURTH QUARTER INTERIM REPORT AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

16 gjensidige.com Gjensidige Bank ASA P.O.Box 313 NO-6802 Førde Telephone: 03100