Investor Relations Supplementary information First half and second quarter report
SpareBank 1 SMN 7467 Trondheim Chief Executive, CEO Finn Haugan For further information, please contact Kjell Fordal, Executive Director Finance Division tel +47 905 41 672 Switchboard tel +47 07300 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 www.smn.no www.huginonline.no www.egenkapitalbevis.no Financial Calendar 1 st quarter 26 April 2 nd quarter 09 August 3 rd quarter 26 October - 1 -
Contents 1. SpareBank 1 SMN overview... 3 1.1. Financial highlights... 3 1.2. Business description... 4 1.3. Credit ratings... 6 1.4. Equity capital certificate (MING)... 6 2. Financial results... 9 2.1. Main figures... 9 2.2. Net interest income... 10 2.3. Commission income... 13 2.4. Operating expenses... 15 3. Loans to customers... 17 3.1. Distribution of loans by industry... 17 3.2. Risk profile and write-downs... 18 4. Capital Adequacy... 22 5. Funding...25 6. Financial results... 26 7. Segment information... 28 7.1. Extract from income statement... 28 7.2 Retail division... 30 7.3 Corporate division... 32 7.4 Markets...... 34 7.5. Subsidiaries... 35 8. Development last ten years... 39-2 -
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 -
1.2. Business description SpareBank 1 SMN is Mid-Norway s largest bank with assets totalling NOK 107.8 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 -
Overall organisation Supervisory Board Chair Randi Dyrnes ECC holders Depositors County Council Employees External audit 40 % 17.50 % 17.50 % 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 -
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 -
1.3. Credit ratings Moody's Todays Year end rating 2010 2009 2008 2007 2006 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 2010 2009 2008 2007 2006 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 3 3 3 3 3 3 3 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 32.10 (NOK 45.18). Earnings per ECC were NOK 2.63 (NOK 2.99). Book value per ECC was NOK 48.03 as of end second quarter (NOK 46.36). Key figures 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 ECC price 32.10 36.60 36.31 36.31 45.18 32.10 45.18 36.31 49.89 Number of certificates issued, millions 124.21 124.21 102.77 102.77 102.74 124.21 102.74 102.77 102.74 Booked equity capital per ECC (incl. dividend) 48.03 46.93 48.91 47.79 46.36 48.03 46.36 48.91 46.07 Adjusted profit per ECC 1.22 1.41 1.79 1.42 1.51 2.63 2.99 6.04 5.94 P/E per ECC 6.58 6.49 5.07 6.39 7.48 6.10 7.56 6.01 8.40 P/B equity capital 0.67 0.78 0.74 0.75 0.96 0.67 0.96 0.74 1.08 Stock price compared with OSEBX and OSEEX 1 July 2010 to 30 June 60 50 40 30 20 10 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 Jul 12 SMN OSEBX OSEEX OSEBX = Oslo Stock Exchange Benchmark Index (rebased) OSEEX = Oslo Stock Exchange ECC Index (rebased) - 6 -
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 2.00 6,000 1.80 1.60 1.40 1.50 1.22 5,000 4,000 1.20 1.00 3,000 0.80 0.60 4.1 4.7 5.1 4.7 4.6 3.7 3.7 4.5 4.0 2,000 0.40 1,000 0.20 0.00-2010 2010 2010 3Q 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 813 183 183 182 182 182 Unrealised gains reserve 45 43 43 28 28 28 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 25 28 28 17 17 17 B. The saving bank reserve 2,636 2,639 2,639 2,362 2,362 2,362 Provision for gifts - - 40 - - 192 Recommended dividends - - 190 - - 285 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 -
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 1,014,587 987,123 977,006 938,361 831,041 42,936,264 81,282,202 124,218,466 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 % 34.57 % 65.43 % 100.00 % 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 525 525 5,250,000 75 5 600 605 6,000,000 6,053,099 5 5 610 614 6,099,432 6,148,060 154 217 768 986 7,685,075 9,859,317 24 1,009 10,097,817-1,009 40,391,268 253 1,262 50,489,085 82 1,344 53,752,203 5 1,349 53,976,003 91 6 1,440 1,447 57,603,748 57,861,806 289 1,736 69,434,167 624 2,360 94,397,474 13 2,373 94,905,286 1 2,373 94,930,286 95 16 2,468 2,484 123,407,456 124,218,466-8 -
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. 2.1. Main figures 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest 369 351 338 354 344 720 700 1,392 1,317 Commission income and other income 288 235 232 234 232 524 453 919 855 Net return on financial investments 79 160 202 88 99 239 188 478 383 Total income 737 746 772 676 675 1,483 1,341 2,789 2,555 Total operating expenses 401 398 412 361 361 799 708 1,482 1,140 Result before losses 336 349 360 315 314 684 633 1,306 1,414 Loss on loans, guarantees etc. 17 8 26 8-1 25-7 27 132 Result before tax 319 340 333 306 315 659 640 1,279 1,282 Tax charge 81 68 54 66 65 149 135 255 260 Net profit 238 272 279 240 250 510 505 1,024 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 99,030 101,455 100,009 98,503 97,997 Average total assets 103,422 100,242 100,732 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. 2010 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 % -0.01 % 0.05 % -0.02 % 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 32.10 36.60 36.31 36.31 45.18 32.10 45.18 36.31 49.89 Booked equity capital per ECC (incl. dividend) 48.03 46.93 48.91 47.79 46.36 48.03 46.36 48.91 46.07 Adjusted profit per ECC 1.22 1.41 1.79 1.42 1.51 2.63 2.99 6.04 5.94-9 -
2.2. Net interest income Net interest income 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Interest income 989 1,009 1,029 1,011 936 1,998 1,851 3,891 3,422 Interest expences 619 659 691 657 592 1,278 1,151 2,499 2,105 Net interest income 369 351 338 354 344 720 700 1,392 1,317 As percentage of total income 50 % 47 % 44 % 52 % 51 % 49 % 52 % 50 % 52 % Development in net interest income 380 360 51% 52% 369 55.0 % 340 320 344 354 338 351 47% 50% 50.0 % 45.0 % 300 44% 40.0 % 280 260 35.0 % 240 220 30.0 % 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 28 84 112 Deposits 11-65 -54 Total 39 19 58-10 -
Changes in net interest income 30 Jun. (in NOK million) Change Net interest income 720 21 700 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 21 84 28 13 11 5 13 42 65 700 720 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 12-11 -
Margin development Definition margin: Average customer interest minus 3 months average nibor 1.60 1.53 1.46 1.76 2.05 0.40 0.47 0.48 0.27-0.04 30 Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Lending margin Deposits margin Volume development 120 Volume in NOK bn 100 90.9 92.7 95.2 97.4 100.6 80 60 46.0 46.0 47.9 49.0 51.5 40 20 0 30 Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Lending volume Deposits volume - 12 -
2.3. Commission income Total commission and other income 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Guarantees 6 9 7 7 7 15 15 28 29 SpareBank 1 Boligkreditt 49 25 9 15 22 74 48 71 107 Commission of savings products 11 11 11 14 11 22 19 45 43 Real estate agency 66 52 62 56 56 117 102 221 170 Insurance 28 31 29 26 26 59 51 105 96 Payments transmission 69 64 70 71 69 133 134 275 279 Other 11 6 0 10 8 16 21 31 43 Total commissions income 240 196 188 200 199 436 390 778 766 Operating- and sales income real estate 27 20 18 24 23 47 40 82 73 Other operating income 44 40 52 31 28 84 59 143 97 Total other operating income 71 60 69 56 52 131 99 224 170 Commission expenses 22 21 25 21 19 43 37 83 81 Total commissions and other income 288 235 232 234 232 524 453 919 855 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 524 70 453 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 26-13 -
Net return on financial investments 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Income from investment in related companies 50 99 119 49 69 149 122 290 249 of which SpareBank 1 Gruppen AS 13 47 46-1 19 60 50 96 164 BN Bank ASA 12 15 16 29 30 27 44 89 59 Bank 1 Oslo Akershus AS 8 11 1 5 6 19 9 15 37 SpareBank 1 Boligkreditt AS 11 14 2 4 5 25 10 16 16 SpareBank 1 Næringskreditt AS 2 3 3 2 3 5 4 9 2 Polaris Media AS 13 2 1 14 7 15 7 23 0 Other 1) -9 7 49-5 -1-2 -4 41-28 Capital gains/dividens, shares and ECCs 2) -10 3 35 27 10-7 39 101 121 of which dividends 9 0 2 0 31 10 34 36 43 capital gains on shares -16 1 38 30-17 -15 10 79 78 capital gains on ECCs -3 1-5 -4-4 -2-5 -13 0 Capital gains, bonds and derivatives 4 34 7-19 5 38 2-10 -27 Net gain on trading and derivatives Markets 36 23 40 31 16 59 25 96 39 Net return on financial investments 79 160 202 88 99 239 188 478 383 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 239 50 188 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 27-14 -
2.4. Operating expenses Operating expenses 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Salary 204 207 194 191 190 411 367 752 656 Pension costs (defined benefit plan) 13 12-2 11 11 25 20 28-100 Employer's insurance contributions 4 3 1 3 3 7 7 11 10 Other personnel expenses 3 10 3 3 4 12 12 18 17 Total personnel expenses 223 232 196 209 208 455 405 810 583 EDP and telecommunication expenses 45 46 53 43 46 92 88 185 156 Postage and transportation services 7 7 7 6 7 13 14 27 27 Marketing 11 12 16 10 12 23 24 50 43 Operating exp. on properties and premises 27 21 26 24 24 48 45 95 94 Other external services 16 10 19 12 13 26 24 55 52 Other operating expenses 47 46 69 35 32 93 69 173 138 Depr./write-downs of fixed & intangible assets 24 23 25 23 19 48 40 87 48 Other expenses 178 166 216 153 153 343 303 673 557 Total operating expenses 401 398 412 361 361 799 708 1482 1140 Cost/income ratio 0.54 0.53 0.53 0.53 0.53 0.54 0.53 0.53 0.45 Cost/income ratio ex financial inv. 0.61 0.68 0.72 0.61 0.63 0.64 0.61 0.64 0.53 12-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 799 90 708 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. 900 56 % 675 676 772 746 737 54 % 600 53 % 54 % 361 361 412 398 401 300 52 % 0 11 3Q11 4Q11 1Q12 12 Income Expenses Cost/income ratio * * Total operating expences as a percentage of total operating income 50 % - 15 -
Developement of employees Employees in employment 2010 2009 2008 Retail market division 391 392 378 367 381 C orporate market 195 187 172 155 155 SpareBank 1 SMN Markets 43 40 33 32 21 Business operations 117 112 128 134 137 Management and staff 58 55 53 79 57 Parent bank 806 786 764 767 750 EiendomsMegler 1 Midt-Norge AS 168 159 148 139 131 Allegro Finans AS 10 9 10 10 10 SpareBank 1 SMN Finans AS 45 41 41 34 25 SpareBank 1 SMN Regnskap AS 109 98 68 64 63 SpareBank 1 Kvartalet and other 6 4 4 4 4 Total 1,144 1,098 1,035 1,017 982 Employees in employment 14 14 41 14 34 25 64 68 63 139 148 131 13 41 98 159 16 45 109 168 750 767 764 786 806 2008 2009 2010 Parent bank SpareBank 1 SMN Regnskap AS Other EiendomsMegler 1 Midt-Norge AS SpareBank 1 SMN Finans AS - 16 -
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 32 64 92 54 58 101 Other sectors 2,646 1,428 971 1,052 694 339 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 % - 17 -
3.2. Risk profile and write-downs Actual risk profil, Exposure At Default NOK billion 22.5 25.8 16.8 11.8 12.5 15.2 7.0 1.9 1.8 0.2 0.3 A B C D E F G H I J K Risk classification in SpareBank 1 SMN Risk class Low High A 0.01 0.10 AAA - A3 B 0.10 0.25 Baa1 - Baa2 C 0.25 0.50 Baa3 D 0.50 0.75 Ba1 E 0.75 1.25 Ba2 F 1.25 2.50 G 2.50 5.00 Ba2 - B1 H 5.00 10.00 B1 - B2 I 10.00 99.99 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 2-8 13-19 -40-6 -44-50 3 Reassessments and recoveries -15-17 -13-27 -39-32 -38-77 -128 Total individual write-downs 17 8 26 8-1 25-7 27 131 Change in group write-downs on loans 0 0 0 0 0 0 0 0 1 Write-downs on loans and guarantees 17 8 26 8-1 25-7 27 132 As % of gross loans incl. Boligkreditt 0.07 % 0.04 % 0.11 % 0.03 % -0.01 % 0.05 % -0.02 % 0.03 % 0.16 % - 18 -
Loss on loans by segment 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Corporate 15 7 22 1-8 22-19 5 104 Retail 3-1 1 4 2 2 3 7 4 SMN Finans and other -1 2 3 3 5 1 8 15 23 Collective write downs 0 0 0 0 0 0 0 0 1 Total loss on loans 17 8 26 8-1 25-7 27 132 3 1 3 22 5 3 4 2 7 15 2 1-1 -1-8 11 3Q11 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 164 172 159 178 217 172 222 222 219 Confirmed losses in the period on loans, guarantees etc., not prev. subject to ind. write down 1 24 2 0 2 25 8 10 34 Reversal of previous years' write downs -2-4 0-6 -7-7 -22-28 -22 Increase in write downs of commitments not previously subject to individual write down 17 7 15 18 15 24 26 59 38 Write downs of loans not previously subject to 30 Jun. individual write down -14-35 -4-30 -50-49 -57-91 -46 Individual write downs to cover loss 166 164 172 159 178 166 177 172 222 Collective write downs to cover loss on loans, guarantees at start of period 290 290 290 290 290 290 290 290 289 Period s collective write down to cover loss on loans, guarantees etc. 0 0 0 0 0 0 0 0 1 Collective write downs to cover loss on loans, guarantees 290 290 290 290 290 290 290 290 290-19 -
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 3,044 657 498 218 Public administration 633 633 - - - - - Agriculture and forestry 6,340 3,189 1,435 1,296 187 222 11 Sea farming industries 3,023 2,163 740 66 17 0 37 Manufacturing 4,609 1,370 1,589 1,274 52 304 21 Construction, power and water supply 4,446 1,056 836 2,138 119 215 82 Retail trade, hotels and restaurants 3,339 704 1,505 891 194 29 16 Maritime sector 1,105 62 493 527 11 10 2 Property management 14,697 2,654 4,072 7,085 600 212 74 Business services 4,549 1,156 949 2,252 62 100 29 Transport and other services provision 8,650 1,735 3,607 3,070 35 174 30 Finance 0 0 - - - - 0 Other sectors 1,171 387 246 538 - - - 12 115,797 65,086 24,312 22,182 1,935 1,763 519 109,621 60,977 22,594 21,498 2,199 1,884 468 2010 98,801 52,410 20,338 20,439 2,451 2,311 852 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) 338 318 338 332 361 499 Impaired commitments (gross) 199 183 204 223 178 211 Gross non-performing and impaired commitments 537 501 542 555 539 710 Individual write-downs 166 164 172 160 177 222 Collective write-downs 290 290 290 290 290 290 Write-down ratio (%) 84.9 % 90.5 % 85.2 % 81.0 % 86.5 % 72.1 % Default in excess of 90 days NOK million 128 136 147 151 147 126 112 124 114 131 3Q 4Q 1Q Retail > 90 d Corporate > 90 d - 20 -
Net non-performing and impaired commitments NOK million 1,400 2.0 % 1,050 1.5 % 700 539 555 542 537 501 466 449 462 454 456 1.0 % 350 0.59 % 0.53 % 0.5 % 0 11 3Q11 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 % - 21 -
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 - 22 -
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 0 0 0 0 0 0 Premium reserve 813 183 183 183 182 182 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 0 0 190 0 0 285 Provision for gifts 0 0 40 0 0 192 Reserve for unrealised gains 90 92 85 60 71 66 Other equity and minority interest 1,400 1,404 1,409 1,261 1,267 1,244 Net profit 510 272 0 745 505 0 Total book equity 9,365 8,393 8,348 8,126 7,902 7,846 Deferred tax, goodwill and other intangible assets -670-678 -692-658 -643-466 Share of reserve for unrealised gains in associates 64 64 64 65 65 65 Deduction for allocated dividends 0 0-230 0 0-477 50 % deduction for subordinated capital in other financial institutions -2 0 0 0 0 0 50 % deduction for expected losses on IRB, net of write-downs -153-158 -147-176 -151-216 50 % capital adequacy reserve -682-651 -656-638 -636-571 Share of non-performing, non-amortizsed estimate deviations -74-74 0 0 0 0 Net profit -510-272 0-745 -505 0 Year-to-date profit included in core capital (50%) 255 136 0 373 252 0 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 % 37 0 0 0 0 0 Perpetual subordinated capital 325 318 328 326 315 466 Dated subordinated capital 1,653 1,598 1,674 1,659 1,574 1,680 50 % deduction for subordinated capital in other financial institutions -2 0 0 0 0 0 50 % deduction for expected losses on IRB, net of write-downs -153-158 -147-176 -151-216 50 % capital adequacy reserve -682-651 -656-638 -636-571 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 41 43 42 58 59 68 Retail morgage exposure 541 518 513 495 451 451 Other retail exposure 30 32 33 34 33 34 Equity investments 0 0 0 0 0 0 Total credit risk IRB 3,707 3,578 3,357 3,201 3,154 3,058 Debt risk 223 206 182 172 98 165 Equity risk 15 16 16 13 15 15 Currency risk 0 0 0 0 0 0 Operational risk 420 420 400 400 400 331 Exposures calculated using the standardised approach 2,121 2,018 2,184 2,068 1,962 1,864 Deductions -115-110 -111-107 -107-98 Minimum requirements subordinated capital 6,371 6,127 6,029 5,748 5,522 5,335 Core capital ratio 10.95 % 10.32 % 10.43 % 10.45 % 10.71 % 10.93 % Capital adequacy ratio 12.43 % 11.76 % 12.02 % 12.07 % 12.31 % 12.97 % - 23 -
Capital Adequacy 12.31 % 10.71 % 12.07 % 12.02 % 11.76 % 10.45 % 10.43 % 10.32 % 12.43 % 10.95 % 30 Jun. 30 Sept. 31 Dec. 31 Mar. 30 Jun. Capital adequacy ratio Core capital ratio - 24 -
5. Funding Funding maturity dates NOK mill. 10.0 9.0 9.8 8.0 7.0 6.0 5.0 6.3 4.0 3.0 4.0 3.8 4.4 3.6 2.0 1.0 0.0 2013 2014 2015 2016 > 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 1,236 232 220 206 323 235 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 24 16 26 24 13 164 Hybrid equity 471 453 481 945 893 936 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 % - 25 -
6. Financial results Financial results 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Interest income 989 1,009 1,029 1,011 936 1,998 1,851 3,891 3,422 Interest expenses 619 659 691 657 592 1,278 1,151 2,499 2,105 Net interest 369 351 338 354 344 720 700 1,392 1,317 Commission income 240 196 188 200 199 436 390 778 766 Commission expenses 22 21 25 21 19 43 37 83 81 Other operating income 71 60 69 56 52 131 99 224 170 Commission income and other income 288 235 232 234 232 524 453 919 855 Dividends 9 0 2 0 31 10 34 36 43 Income from investment in related companies 50 99 119 49 69 149 122 290 249 Net return on financial investments 20 60 81 39-1 80 32 152 90 Net return on financial investments 79 160 202 88 99 239 188 478 383 Total income 737 746 772 676 675 1,483 1,341 2,789 2,555 Staff costs 223 232 196 209 208 455 405 810 583 Administration costs 98 97 114 86 96 195 181 381 339 Other operating expenses 80 69 103 66 57 149 122 291 218 Total operating expenses 401 398 412 361 361 799 708 1,482 1,140 Result before losses 336 349 360 315 314 684 633 1,306 1,414 Loss on loans, guarantees etc. 17 8 26 8-1 25-7 27 132 Result before tax 319 340 333 306 315 659 640 1,279 1,282 Tax charge 81 68 54 66 65 149 135 255 260 Net profit 238 272 279 240 250 510 505 1,024 1,022 Majority share 235 271 277 238 253 506 501 1,016 1,017 Minority interest 3 1 2 2-3 4 4 8 5 Balance sheet 30 Jun. 31 Mar. 31 Dec. 30 Sept. 30 Jun. 31 Dec. (in NOK million) 2010 Cash and receivables from central banks 1,152 650 1,519 409 3,922 2,112 Deposits with and loans to credit institutions 2,623 1,576 2,557 1,142 1,459 420 Gross loans to customers before write-down 73,595 71,681 73,105 71,570 68,559 69,847 - Specified write-downs -166-164 -172-159 -177-222 - Write-downs by loan category -290-290 -290-290 -290-290 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 606 625 611 588 578 618 Investment in related companies 4,628 4,582 4,259 4,258 4,215 3,526 Goodwill 471 471 471 471 460 460 Other assets 3,998 2,974 2,779 3,278 3,170 2,722 Assets 107,815 99,030 101,455 100,009 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 0 0 0 0 0 0 Premium fund 813 183 183 183 182 182 Dividend equalisation fund 1,457 1,457 1,457 1,160 1,160 1,159 Recommended dividends 0 0 190 0 0 285 Provision for gifts 0 0 40 0 0 192 Savings bank s reserve 2,611 2,611 2,611 2,344 2,345 2,345 Unrealised gains reserve 90 92 85 60 71 66 Other equity capital 1,264 1,268 1,274 1,127 1,138 1,147 Result of the period 510 272 0 745 505 0 Minority interests 136 136 135 134 129 97 Total equity capital 9,365 8,393 8,348 8,126 7,902 7,846 Total liabilities and equity 107,815 99,030 101,455 100,009 98,503 97,997-26 -
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. 60.9 % 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 90,939 100,552 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 99,030 101,455 100,009 98,503 107,815 98,503 101,455 97,997 Average total assets 103,422 100,242 100,732 99,212 96,435 102,766 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 806 785 786 781 758 806 758 786 764 Employees in employment subsidiares 338 313 323 304 289 338 289 323 271 Number of branches 52 54 54 54 54 52 54 54 54 Lending margin 2.05 1.76 1.46 1.53 1.60 1.91 1.66 1.57 1.66 Deposit margin (0.04) 0.27 0.48 0.47 0.40 0.12 0.40 0.44 0.41 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 % -0.01 % 0.05 % -0.02 % 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 32.10 36.60 36.31 36.31 45.18 32.10 45.18 36.31 49.89 Number of certificates issued, millions 124.21 124.21 102.77 102.77 102.74 124.21 102.74 102.77 102.74 Booked equity capital per ECC (incl. dividend) 48.03 46.93 48.91 47.79 46.36 48.03 46.36 48.91 46.07 Adjusted profit per ECC 1.22 1.41 1.79 1.42 1.51 2.63 2.99 6.04 5.94 P/E per ECC 6.58 6.49 5.07 6.39 7.48 6.10 7.56 6.01 8.40 P/B equity capital 0.67 0.78 0.74 0.75 0.96 0.67 0.96 0.74 1.08 * 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. - 27 -
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 251 433-1 2 58 0 0-22 720 Allocated 8 56 2 0 0 0 0-66 0 Total interest income 259 489 1 2 58 0 0-88 720 Commission income and other income 204 64 10 166-1 5 52 23 524 Net profit on financial investments 1 17 41 0 0 0 1 180 239 Total income 464 570 52 168 56 5 53 115 1,483 Total operating expenses 320 196 45 126 25 7 44 36 799 Ordinary operating profit 144 374 8 42 31-1 9 80 684 Loss on loans, guarantees etc. 2 22 0 0 1 0 0 0 25 Result before tax 142 351 8 42 30-1 9 80 659 Post-tax return on equity 16.2 % 13.8 % 11.7 % Balance sheet Loans and advances to customers 55,338 40,163 0 72 2,997 29 8 1,944 100,552 adv. of this to Boligkreditt -24,921-1,077 0 0 0 0 0-959 -26,958 Individual allowance for impairment on loan -31-124 0 0-11 0 0 0-166 Group allowance for impairment on loan 0 0 0 0-16 0 0-273 -290 Other assets 201 579 0 187 37 8 51 33,616 34,676 Total assets 30,586 39,541 0 259 3,005 37 59 34,328 107,815 Deposits to customers 22,644 25,871 0 0 0 0 0 2,990 51,504 Other liabilities and equity 7,943 13,670 0 259 3,005 37 59 31,338 56,310 Total liabilites 30,586 39,541 0 259 3,005 37 59 34,328 107,815-28 -
Interest income, Retail and Corporate 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Retail 126 125 125 129 125 251 257 511 579 Corporate 220 214 199 206 187 433 378 783 714 Net interest income 346 338 335 330 314 684 635 1,304 1,293 Developement in margin, Retail and Corporate* 1Q 4Q 3Q 30 Jun. Lending (in percentage) 2010 Retail 1.82 1.45 1.07 1.15 1.27 1.64 1.34 1.22 1.42 Corporate 2.47 2.27 2.07 2.13 2.12 2.37 2.14 2.12 2.12 Total 2.05 1.76 1.46 1.53 1.60 1.91 1.66 1.57 1.66 1Q 4Q 3Q 30 Jun. Deposits (in percentage) 2010 Retail 0.09 0.41 0.83 0.87 0.64 0.25 0.60 0.73 0.56 Corporate -0.08 0.18 0.21 0.19 0.16 0.05 0.20 0.20 0.28 Total -0.04 0.27 0.48 0.47 0.40 0.12 0.40 0.44 0.41 *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 116 89 77 89 90 205 179 345 321 Corporate 42 39 43 45 39 81 80 169 151 Total 157 128 109 133 130 286 259 501 472-29 -
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 147,033 141,772 No. of credit cards 86,036 85,025 No. of internet bank customers 135,438 126,598 No. of telephone bank customers 140,501 136,335 No. of active customers 186,082 184,116 FTEs 391 377 Financial performance 1Q 4Q 3Q (in NOK million) 2010 Net interest income lending 68 55 40 44 60 123 131 215 368 Net interest income deposits 58 70 86 85 65 127 125 296 211 Net interest income allocated capital 6 3 2 3 5 8 11 16 13 Total interest income 132 127 128 131 130 259 268 527 592 Net guarantee commision, incl. Boligkreditt 55 29 11 17 25 84 51 80 67 Net commision of savings products 8 9 14 13 15 17 25 52 49 Net commision insurance services 22 25 21 21 20 48 39 81 73 Net commision payment trans. services 30 25 27 34 30 55 63 123 130 Other commision income - 0 0 0 0 0-0 0 1 0 Net fee and commission income 115 89 73 85 90 204 179 337 319 Net profit on financial investments 0 0 3 4 0 1 1 8 2 Total income 247 216 204 220 220 464 448 872 913 Total operating expences* 158 163 152 149 154 320 307 608 468 Results 89 54 52 71 67 144 141 264 445 Loss on loans, guarantees etc. 3-1 1 4 2 2 3 7 4 Results before tax 86 55 51 67 64 142 138 256 441 *) Includes both direct and distributed expences 30 Jun. Post-tax return on equity (annualized) 16.2 % 17.6 % 15.8 % 25.5 % - 30 -
Development in margin Definition margin: Average customer interest minus 3 months average nibor 1.82 1.27 1.15 1.07 1.45 0.64 0.87 0.83 0.41 0.09 3Q 4Q 1Q Lending margin Deposits margin Development in lending volume 16 % 55.3 NOK mill. 56,000 53.5 12 % 9.8% 50.7 52.1 12.2% 53,000 8 % 49.3 50,000 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. 23,000 10 % 8 % 20.7 20.5 21.2 21.4 9.6% 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 - 31 -
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 195 177 Financial performance 1Q 4Q 3Q 30 Jun. (in NOK million) 2010 Net interest income lending 161 146 135 148 138 307 278 561 555 Net interest income deposits 58 68 63 58 49 126 100 221 158 Net interest income allocated capital 33 23 31 32 32 56 65 128 56 Total interest income 253 236 230 238 219 489 443 910 770 Net guarantee commision, incl. Boligkreditt 9 9 8 8 9 17 19 36 34 Net commision of savings products 2 0 1 0-1 2 1 2 9 Net commision insurance services 5 6 8 5 6 10 12 25 24 Net commision payment trans. services 15 18 16 16 19 33 37 69 68 Other commision income 1 0 0 0 0 1 1 1 1 Net fee and commission income 31 32 33 30 34 63 69 133 135 Net profit on financial investments 10 7 10 16 5 17 10 36 16 Total income 295 275 273 283 259 570 523 1,079 921 Total operating expences* 96 99 94 86 87 196 171 351 278 Results 199 176 179 198 172 374 351 728 642 Loss on loans, guarantees etc. 15 7 22 1-8 22-19 5 104 Results before tax 184 169 157 196 180 351 370 724 539 *) Includes both direct and distributed expences Post-tax return on equity (annualized) 13.8 % 14.2 % 13.5 % 12.0 % - 32 -
Development in margin Definition margin: Average customer interest minus 3 months average nibor 2.12 2.13 2.07 2.27 2.47 0.16 0.19 0.21 0.18-0.08 3Q 4Q 1Q Lending margin Deposits margin Development in lending volume 30 % 25 % 37.2 37.5 38.7 39.3 40.2 NOK mill. 45,000 40,000 20 % 35,000 15 % 30,000 10 % 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. 28,000 25 % 20 % 25.3 25.5 25.9 15 % 10 % 23.6 12.2% 23.9 9.4% 24,000 5 % 0 % 20,000 3Q 4Q 1Q Deposits volume Growth in deposits last 12 months - 33 -
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 -1 1 0 3 3-1 6 10 18 Net interest income allocated capital 1 1 1 1 1 2 3 5 1 Total interest income -0 2 1 4 4 1 9 15 19 Net fee and commission income 7 3 8 7 5 10 9 24 30 Capital gain/agio Securities 25 16 24 16 13 41 25 64 19 Total income 32 21 34 27 21 52 43 103 68 Total operating expences 24 21 35 21 19 45 38-94 67 Results 8-0 -1 6 3 8 5 9 1 Loss on loans, guarantees etc. - - - - - - - - - Results before tax 8-0 -1 6 3 8 5 9 1 Cost and income (NOK mill.) Result before tax (NOK mill.) 40 30 20 21 19 27 21 34 35 21 21 32 24 8 20 15 10 5 10 3 0-5 0-10 3Q 4Q 1Q Total operating expences Total income Results before tax - 34 -
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 1 1 1 1 1 2 2 5 4 Total interest income 1 1 1 2 1 2 2 5 4 Commission income and other income 94 72 83 82 80 166 144 308 245 Total income 95 73 84 83 82 168 146 313 249 Staff costs 50 39 49 48 49 89 83 181 140 Administration costs 12 13 8 9 10 25 22 39 39 Other operating expenses 6 7 5 4 2 13 8 17 19 Total operating expenses 67 59 63 61 61 126 113 237 198 Result before tax 28 14 21 22 21 42 33 76 51 Cost and income (NOK mill.) Result before tax (NOK mill.) 100 80 60 82 21 61 83 61 84 63 73 59 95 28 67 30 24 18 40 12 20 6 0 0 3Q 4Q 1Q Total operating expenses Total income Result before tax - 35 -
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 28 30 23 22 26 58 48 94 93 Commission income and other income -1-1 0-0 -3-1 -1-1 5 Net profit on financial investments 0 0-1 -0 0 0 1-1 1 Total income 27 30 22 22 24 56 48 92 99 Staff costs 8 9 10 7 7 17 14 31 25 Administration costs 3 3 2 3 3 6 6 11 10 Other operating expenses 1 1 3 1 1 3 3 7 4 Total operating expenses 12 13 15 12 11 25 23 50 39 Ordinary operating profit 15 16 8 9 12 31 25 42 60 Loss on loans, guarantees etc. -1 2 4 3 5 1 8 15 24 Total costs incl. loss on loans 11 15 18 15 16 26 31 65 64 Result before tax 16 14 4 6 7 30 17 27 35 Cost and income (NOK mill.) 30 30 Result before tax (NOK mill.) 27 30 25 24 22 22 25 20 15 16 15 18 15 16 11 20 15 10 5 7 10 5 0 0 3Q 4Q 1Q Total costs incl. loss on loans Total income Result before tax - 36 -