SpareBank 1 SR-Bank. SR-Boligkreditt. Norwegian economy. Appendix

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2 Disclaimer This presentation contains forward-looking statements that reflect management s current views with respect to certain future events and potential financial performance. Although SpareBank 1 SR-Bank believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors. Important factors that may cause such a difference for SpareBank 1 SR-Bank include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that SpareBank 1 SR-Bank has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. 2

3 SpareBank 1 SR-Bank SR-Boligkreditt Norwegian economy Appendix 3

4 SR-Bank at a glance Second largest Norwegian bank Market cap: NOK 22.0 Billion Total assets: NOK Billion Total lending: NOK Billion Total deposits: NOK 99.6 Billion No. of branches: 36 Employees: Banks Market share 1 DnB Bank Nordea Bank Norge (Swedish) Danske Bank (Danish) Handelsbanken (Swedish) SpareBank 1 SR-Bank : The first bank that today forms part of SpareBank 1 SR-Bank was established. 1976: 24 savings banks merge to form Sparebanken Rogaland. 1994: SR-Bank (Sparebanken Rogaland) lists its primary capital certificates on the Oslo Stock Exchange. 1996: SR-Bank is one of the founders of SpareBank 1, an alliance. 2012: SpareBank 1 SR-Bank converted from a savings bank to a public limited company ( limited liability savings bank ). Arne Austreid CEO Headquarter: Stavanger Bjergsted Terrasse 1 Postboks Stavanger Tlf: Source: Finans Norge (2016)

5 Ekofisk Johan Sverdrup Troll Eldfisk Snorre Valhall Statfjord Heidrun Gullfaks Oseberg Oseberg sør Grane Gullfaks sør MBOE One of Norway s most prosperous regions The third largest discovery ever on the NCS was made 140 km from our headquarter in 2011 and activity is expected to continue at high levels Johan Sverdrup compared to existing oil fields on the Norwegian continental shelf. Produced reserves Investments on NCS Producible reserves Estimated reserve - High case Estimated reserve - Low case E Norway s largest export region Planned infrastructure project total BNOK GDP per capita, EUR Above 50,000 43,750 50,000 37,500 43,750 Below 37,500 Better infrastructure in the cities Stavanger and Bergen Better connections between cities and sparsely populated areas SR-Bank s market area Better connections between regions in Rogaland, Hordaland and Agder 5 Source: Oljedirektoratet, Statistics Norway, Norges Bank, Stavanger Aftenblad, Statens Vegvesen, SR-Markets

6 Rogaland The leading financial group in the southwest of Norway Population Market share 36% Year of establishment 1839 Market strategy Market leader Unemployment rate 3.1% Hordaland Population Market share 6% Year of establishment 2006 Market strategy Entry/growth Unemployment rate 2.9% Agder Population Market share 8% Year of establishment 2002 Market strategy Growth Unemployment rate 2.8% 6 Source: Nav, SSB and SpareBank 1 SR-Bank

7 SpareBank 1 Alliance and SR-Bank Purpose of the SpareBank 1 Alliance Economies of scale Branding Product companies Separate legal entities No cross guarantees between banks No shared credit decisions Owners of the SpareBank 1 Alliance SpareBank 1 SR-Bank (19.5%) SpareBank 1 SMN (19.5%) SpareBank 1 SNN (19.5%) SpareBank 1 Østlandet (12.4%) Samspar (10 smaller SpareBank 1 banks) (19.5%) Workers union (9.6%) Funding and additional capital Covered Bond Companies Funding Alliance-related benefits Senior funding T1/T2 Covered bond funding SpareBank 1 Alliance SpareBank 1 SR-Bank SR-Boligkreditt (100,0% ownership) Cover assets: NOK 42.6 bn SpareBank 1 Boligkreditt (8,0 % ownership) Cover assets: NOK 14.1 bn SpareBank 1 Næringskreditt (21,9% ownership) Cover assets: NOK 0.5 bn Economies of scale Branding Product companies 7

8 Key figures annual development Return on equity CET 1 11,7 % 10,6 % 10,0 % 11,0 % 10,3 % 11,5 % 13,3 % 14,7 % 15,1 % 15,0 % Q Q Cost ratio Impairment losses on loans 41,8 % 42,1 % 40,9 % 40,7 % 42,1 % 0,15% 0,23% 0,42% 0,29% 0,16% Q Q

9 Key figures Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Return on equity after tax (%) 10,3 11,4 12,9 11,0 8,7 Net interest margin (%) 1,50 1,50 1,54 1,52 1,53 Impairment losses on loans and guarantees in % of gross loans incl. covered bond companies Non-performing and other problem commitments in % of gross loans incl. covered bond companies 0,16 0,26 0,27 0,29 0,37 1,14 1,13 1,18 1,21 1,23 Cost to income ratio 42,1 41,0 37,7 41,3 43,3 Annual growth in loans to customers, gross incl. covered bond companies (%) 3,1 2,6 1,2 0,5-0,4 Annual growth in deposits from customers (%) 7,0 11,0 13,0 11,3 7,0 Total assets (BNOK) 217,4 216,6 215,3 212,9 200,2 Portfolio of loans in covered bond companies (BNOK) 14,6 14,6 18,0 19,4 23,3 Risk weighted assets (BNOK) 122,8 120,2 121,8 120,7 118,4 Liquidity Coverage Ratio (LCR) (%) Earnings per share (NOK) 2,03 2,18 2,39 2,01 1,58 Book value per share (NOK) 79,24 77,24 75,07 72,72 72,91 9

10 Income statement Group Income Statement (MNOK) Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Net interest income Net commission and other income Net income on investment securities Total income Total operating expenses Operating profit before losses Impairment losses on loans and guarantees Operating profit before tax Tax expense Net profit

11 Lending and deposit margins Lending margins* Deposit margins 2,68% 2,75% 2,73% 2,76% 2,71% 2,71% 2,74% 2,78% 2,74% 0,29% 0,34% 0,24% 0,11% 0,12% 0,13% 1,48% 1,55% 1,45% 1,38% 1,59% 1,69% 1,78% 1,79% 1,69% -0,05% -0,12% -0,12% -0,03% 0,04% 0,03% -0,08% -0,09% -0,01% -0,15% 0,04% -0,18% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Corporate market Retail market Corporate market Retail market 11 *SpareBank 1 SR-Finans AS was merged into SpareBank 1 SR-Bank from 1 January The figures (lending margins) are therefore not entirely comparable. Lending margins for the corporate market also changed in 2017 compared with what was previously reported due to the internal correction of net interest income. Definition: Average customer interest rate against 3-month moving average for 3-month NIBOR. Lending margins include loan portfolio in covered bond companies

12 MNOK MNOK Lending volume and 12 months growth Corporate Market (incl. Capital Markets) ,0% 3,8% 2,4% -0,5% -0,7% -2,3% -3,5% -2,8% -1,9% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q % 10% 5% 0% -5% Volume Growth % Retail Market ,1% 1,8% 1,1% 0,2% 0,8% 1,7% 2,1% 3,1% 3,0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q % 10% 5% 0% Volume Growth % 12 Figures incl. loan portfolio in covered bond companies.

13 Loan portfolio Gross loans (incl. covered bond companies) as at 31 March 2018 amount to NOK billion compared with NOK billion at the same time the year before. 12-month growth in loans of 3.1%. Loans to retail customers (incl. covered bond company) account for 63.0% of total loans, of which 7.5%-points is in SpareBank 1 Boligkreditt. Agriculture / forestry / fishing Industry, Power/water supply and construction Retail trade, hotels and restaurants Shipping Offshore/Oil and gas 2,9% 3,0% 3,5% 4,0% 1,6% 1,6% 1,9% 1,6% 6,2% 6,1% Real estate 15,3% 14,9% Service industry Pub. mgm., financial services and others Other 4,3% 4,9% 1,2% 1,0% 0,2% 0,0% Retail customers 62,9% 63,0% Loans before individual write-downs, nominal amounts. Sector allocation in accordance with the standard categories from Statistics Norway. 0,0 % ,0 % 40, % 60,0 % 80,0 % Share in SpareBank 1 Boligkreditt 13

14 MNOK MNOK Deposits volume and 12 month growth Last 12 months deposits increased by NOK 6.5 billion to 99.6 billion. Corresponds to an increase in the period of 7.0%. Increased deposit growth in the corporate market (incl. capital market) is due to larger deposits from public sector. Deposit growth is 1.4% at 1. quarter 2018 excl. deposits from public sector Corporate Market* 22,7% 24,7% 20,7% 14,0% 10,0% -2,4% -6,5% -6,8% -10,0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Volume Growth % 25% 15% 5% -5% -15% Retail Market ,3% 3,6% 2,6% 1,8% 1,3% 1,9% 3,2% 3,1% 3,9% 20% 15% 10% 5% 0% 0 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18-5% * Includes also the Capital Markets Division. Volume Growth % 14

15 Impairment losses on loans/ Non-performing and doubtful commitments Impairment losses on loans Non-performing and doubtful commitments 1,23% 1,21% 1,18% 1,13% 1,14% 0,37% 0,29% 0,27% 0,26% 0,16% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Collective impairment losses on loans, MNOK Individual impairment losses on loans, MNOK Loss ratio in % of average gross loans incl. from covered bond companies Doubtful commitments, MNOK Non-performing loans, MNOK Non-performing and doubtful commitments in % of gross loans incl. from covered bond companies 15 IFRS 9 Financial Instruments replaced IAS 39 from 1 January 2018.

16 Solid capital ratio SpareBank 1 SR-Bank is compliant with capital requirements as at ROE 10,0 % ROE 11,0 % ROE 10,3 % The Pillar 2 requirement for SpareBank 1 SR-Bank is 2.0%. SpareBank 1 SR-Bank is not defined as a systemically important financial institution (SIFI). The use of different risk weights in the Nordic countries makes comparisons of actual financial strength difficult. 17,5% 15,6% 17,9% 18,1% 16,0% 16,0% CET 1 15,0 % 1,0 % 2,0 % 2,0 % Management buffer Pillar 2 Countercyclical buffer -The Basel I floor is also practised differently. Leverage ratio is 7.4% as at SpareBank 1 SR-Bank exceeds the levels being discussed and recommended internationally. 14,7% 15,1% 15,0% 3,0 % 2,5 % Systemic risk buffer Capital conservation buffer 4,5 % The regulatory minimum requirements CET 1 capital ratio Tier 1 capital ratio Capital ratio 16

17 Solid capital Leverage ratio Risk weighted density 7,4 % 7,2 % 55,0 % 5,2 % 5,2 % 5,2 % 4,6 % 38,6 % 21,6 % 23,9 % 18,5 % 18,4 % 21,3 % SR-Bank Norwegian peer Nordic peer 1 Nordic peer 2 Nordic peer 3 Nordic peer 4 SR-Bank Norwegian peer Nordic peer 1Nordic peer 2Nordic peer 3Nordic peer 4Nordic peer 5 17 Peer figures as at 31 December 2017

18 NOK Billion Funding Well diversified funding. Net Stable Funding Ratio* is 118% on consolidated basis. Good liquidity Net refinancing need over the next 12 months is NOK 15.0 billion. Liquidity buffer is NOK 32.7 billion for normal operation in 29 months with closed markets. In addition to the liquidity buffer, NOK 19.6 billion of home mortgages are prepared for covered bond funding. *The net stable funding ratio (NSFR) is defined as available stable funding relative to necessary stable funding. NSFR is calculated in accordance with guidelines from the Financial Supervisory Authority of Norway. 56,1% 57,2% 55,4% 54,5% Deposits to loans ratio 58,3% 60,5% 59,0% 55,3% 57,2% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q ,0 18,0 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 Annual funding maturity Funding ex CB Covered Bonds 18

19 Bps. Bps. Bps. Bps. An established borrower in the Euromarket 45 Senior Unsecured NDASS 3¼ 07/05/2022 SHBASS 2⅝ 08/23/2022 SRBANK 0 ⅜ 02/10/ Covered Bond DNBNO 0¼ 04/18/2023 SPABOL 0⅜ 03/09/ DNBNO 4¼ 01/18/ SRBANK0 ¾ 01/ Issuer / Ticker Coupon Amount Maturity ISIN SR-Bank / SRBANK 2,000% EUR500mn 14-May-2018 XS SR-Bank / SRBANK 2,125% EUR500mn 27-February-2019 XS SR-Bank / SRBANK 2,125% EUR500mn 03-February-2020 XS SR-Bank / SRBANK 2,125% EUR750mn 14-April-2021' XS SR-Bank / SRBANK 0,375% EUR500mn 10-February-2022 XS SR-BOL / SRBANK 0,500% EUR500mn 28-September-2020 XS SR-BOL / SRBANK 0,125% EUR750mn 8-September-2021 XS SR-BOL / SRBANK 0,750% EUR600mn 18-January-2023 XS SR-BOL / SRBANK 0,375% EUR500mn 3-October-2024 XS SR-BOL / SRBANK 2,500% USD600mn 12-April-2022 XS SR-BOL / SRBANK Nibor3m+34 NOK 5.000mm 25-November 2019 NO SR-BOL / SRBANK Nibor3m+35 NOK 5.000mm 10-September 2020 NO

20 Financial targets and estimates for ,0% Return on equity 10,3% 11,0% CET 1 15,1% 15,0% 15,0% Growth in loans 4,0% - 6,0% 2,6% 1,0% (YTD) Target Target Target ,6 % Growth in costs* NOK 543 million Impairment losses NOK million Dividend share 52% 50% 3,9 % < 3,0 % NOK 74 million Target 2018 *Nominal cost growth Estimate Estimate

21 SpareBank 1 SR-Bank SR-Boligkreditt Norwegian economy Appendix 21

22 Overview SR-Boligkreditt is a wholly owned subsidiary of SpareBank 1 SR-Bank and a dedicated covered bond company. Its objective is to purchase mortgages and to finance these by issuing covered bonds. Loans are transferred to SR-Boligkreditt as true sale on a non-recourse basis. Approval from the Norwegian FSA to report capital according to IRB methods. Rated Aaa by Moody s - Cover Bond anchor: SpareBank 1 SR-Bank, rated A1 (negative) - CR assessment: Aa3, TPI leeway of 4 notches. - Minimum OC-requirement 0.5 % - The minimum level of over-collateralization is set at 2 % in SR-Boligkreditt's Covered Bond Programme. FSA appointed investigator: PricewaterhouseCoopers. SR-Boligkreditt has implemented the common Harmonised Transparency Template of the European Covered Bond Council which is available on website: 22

23 Eligibility criteria Type of properties Collateral Credit criteria Type of products Loan volume Primary residential property in Norway (including detached houses, terraced houses, apartments and cooperative housing units) The mortgage property shall not be "buy-to-let" No holiday homes First priority mortgages Max LTV 75 % or less at the time of transfer (max 60 % for flexible loans/revolving credits) The valuation of the mortgage property must be no less than 24 months old and carried out by an independent third party Quarterly valuation from independent 3 rd party No adverse credit history the previous year Probability of default max 2.50 % Amortizing loans (straight line or annuity) Non-amortizing loans (Flexible loans/revolving credits) No fixed rate loans A maximum loan volume per customer of NOK 12 million (~ 1.3 million) 23

24 Cover pool characteristics Assets/status 100 % first lien mortgages on Norwegian private residential properties 100 % performing loans Cover pool NOK 42.6 bn: Residential mortgages 41.6 bn (97.7 %), Subsititute assets 1.0 bn (2.3 %) Loans and rate loans at a weighted average interest rate of 2.5 % Average loan balance Weighted average original LTV 57.7 % Weighted average current LTV 58.8 % Weighted average seasoning 8.1 years Weighted average life 16.0 years Principal payement frequency Amortizing 71.3 %, Non-amortizing 28.7 % Rate type 100 % floating rate loans OC-level 9.8 % OC-level if house price drop 20 % 1.1 % 24

25 Cover pool characteristics Current LTV Repayment type 22,3 % 24,2 % 16,5 % 12,2 % 17,2 % 7,5 % 29 % Amortizing Non-amortizing 0,0 % 71 % 0-40 % % % % 70-80% % 100 % + Seasoning (number) Weighted average life 22,6 % 19,2 % 25,2 % 2,1 % 6,1 % 7,5 % 11,2 % 10,1 % 11,2 % 6,8 % 3,2 % 7,1 % 7,4 % 7,6 % 8,4 % 10,4 % 9,7 % 16,1 % 5,2 % 3,0 % 25

26 Cover pool characteristics Pool notional Loan performance 33,6 % 28,0 % 22,0 % 0 % Performing loans 11,7 % 4,8 % 0,0 % Delinquent loans (arrears 31 to 90 days) 100 % Gross non performing loans (arrears 90 days +) By geography By property type 3 % 2 % 4 % 11 % 8 % 76 % Aust-Agder Vest-Agder Rogaland Hordaland Other 6 % 15 % 75 % Detached House Semi Detached House Apartment Apartment in housing cooperatives 26

27 SpareBank 1 SR-Bank SR-Boligkreditt Norwegian economy Appendix 27

28 A unique situation with a continuing budget surplus Economic Indicators (%) P 2019P GDP mainland. annualchange (%) Household consumption. annualchange (%) Public consumption. annual change (%) Investment mainland. annualchange (%) Investment public sector Investment offshore oil and gas. annual change (%). Statistics Norway Oil price. USD/bbl Inflation rate (CPI) % month NIBOR % Mortgage rate % Household savings ratio Unemployment rate (registered at labour office) HH sector real disposable income. annual change (%) Current account surplus. share of GDP (%) Sovereign Wealth Fund. share of GDP (%) Sources: Statistics Norway, Central Bank of Norway

29 PMI (Rogaland, Hordaland and Agder) 29 Source: SpareBank 1 SR-Bank Konjunkturbarometer January 2018

30 Signs of high adaptability among oil and gas companies 45% Delivering to new sectors (last 12 months) 40% 35% 30% 25% 20% 15% 10% 5% 0% Q Q Q Q Q Q Q More than 1/3 turnover in oil and gas More than 2/3 turnover in oil and gas 30 Source: SpareBank 1 SR-Bank Konjunkturbarometer January 2018

31 Employment in Norway and the region (Rogaland, Hordaland and Agder) Tourism (3%) 4 % Primary industries (2%) 2 % Other (1%) 1 % Transportation and storage (5%) 5 % Construction (8%) 8 % Public sector (34%) 35 % Retail (13%) 14 % Personal services (19%) 21 % Manufactoring, extraction (oil and gas) and mining (15%) 10 % 31 Source: Statistics Norway (2016)

32 BNOK Oil activity in Norway near the bottom Investments has fallen about 35 % since the oil price drop in Oil prices has however picked up again and Statistics Norway expect a 10 % growth in investments in The operating costs, which are important for the activity in the region, has proven more stable Petroleum activity on Norwegian Continental Shelf Investments Operating costs Other costs incl. expl. Total Break-even Break even new projects (Statoil CMD Feb 2018) Oil price brent 32 Source: Norwegian Petroleum Directorate

33 Retail trade increasing in Norway 12% Retail sales (excl. auto), annual change from same 2-month period previous year 10% 8% 6% 4% 2% 0% -2% -4% Norge Rogaland Hordaland Agder Oslo 33 Source: SSB

34 The unemployment rate has been reduced 6 Norwegian unemployment rate, %, registered (NAV), seasonal adj., monthly Norway Rogaland Hordaland Vest-Agder Norway, SSB AKU-unempl. rate 34 Source: NAV og SSB

35 Housing prices in Norway flatten out House prices. NOK per sqm. Index change 12 months Norway Oslo -6,6 % Bergen Stavanger region -3,2 % -2,2 % -2,0 % Stavanger region Bergen Kristansand Oslo Norway 35 Source: Finn.no, Eiendom Norge og Eiendomsverdi

36 Weak NOK increases competitiveness Norwegian labour costs relative to trading partners (Index 1995=100) 10 Norwegian krone vs key currencies Measured in domestic currency Measured in common currency NOK per USD NOK per EUR Source: Central Bank of Norway Source: Thomson Reuters Datastream 36

37 Norwegian exports and imports Norwegian exports (MNOK) Exports of oil and gas Exports mainland Norway Exports fish Net exports Imports Source: Thomson Reuters Datastream and SpareBank 1 SR-Bank 37

38 Government finances and the sovereign wealth fund Cash flow from the petroleum sector (taxes, ownership) is channeled into the sovereign wealth fund Fiscal spending rule is 3 % of the fund Norwegian oil fund and GDP (BNOK), quarterly figures 400% % Norway BOP and gov't budget (BNOK), quarterly figures % % % 150% % % % Balance of payments (BOP), current account surplus Government budget balance (transfer to/from the oil fund) Government pension fund global (oil fund) Oil fund to GDP mainland (%), rhs Oil fund to GDP (%), rhs 38 Source: Central Bank of Norway

39 SpareBank 1 SR-Bank SR-Boligkreditt Norwegian economy Appendix 39

40 A B Norwegian mortgage market Additional information SpareBank 1 SR-Bank 40

41 Housing and mortgage markets Key characteristics Mortgage Market Howe Ownership Social security Personal Liability Regulation Interest Payments Tax Incentives Total size approximately NOK 3,000 billion (USD 375bn, 330bn) Private banks (incl. savings banks) are the dominant suppliers of mortgages with over 95% market share Scheduled repayment mortgages: 83.4%, flexible: 16.6% Typical maturity: 25 years First priority security market with high doc. Standard Over 80% of households owner occupied (little buy to let) Between 50 and 60% are detached one-family houses Generous unemployment benefits Unemployment benefit represents ca 60% of final salary for 2 years Borrowers are personally liable for their debt Swift foreclosure regime upon non-payment Transparent information about borrowers Loan to value: 85% (75% legal limit for cover pool) Flexible repayment mortgages: max 60% LTV 5% mortgage interest rate increase as stress test Max total debt of 5x a borrower s income before tax High risk weighting for banks for mortgage lending (20-25%) 90-95% of mortgages are variable rate Interest rates can be reset at the lender s discretion, by giving the debtor 6 weeks notice 24 % of interest paid is tax deductible (equal to the basic rate of tax) Low effective real estate tax (lower net worth tax on real estate than financial assets) Household credit growth (12 months growth rate) Households Norwegian Mortgages (by type of property) Terraced/semi detached 16% Other 4% Holiday Houses 1% Detached Houses 59% Businesses Apartments 21% 41 Source: Statistics Norway, Ministry of Finance

42 Housing market Number of houses/flats on the market, monthly figures Number of days to sell a house/flat, monthly Norwegian housing market, monthly figures Completed housing units less newly formed households Dwellings started (seasonal adjusted), 6 months average Dwellings completed, 6 months average Source: Thomson Reuters Datastream, Eiendom Norge, Finn and Eiendomsverdi AS 42

43 Debt servicing reduced due to lower interest rates Household credit growth has been somewhat higher than growth in private net disposable income. The household credit to personal 14 Household credit to personal income and debt-servicing 250 income has therefore increased Lower interest rates are dampening cost of debt servicing 10 Norwegian households debt servicing as a percent of disposable income are reduced from 20% in 1990 to close to 5% in Lending rate (%) Debt servicing to disposable income (%) Credit to disposable income (%), rhs Source: Thomson Reuters Datastream 43

44 Aggregate household indebtedness Total Debt burden in per cent of household income (after tax) All household debts included in the statistic, question of international comparability. 250 Household debt ratio. Percent of disposable income. Projections for High home ownership (mortgage debt rather than rent commitments). 200 Generous benefits (pensions, healthcare, education, childcare, maternity, unemployment) Income growth over the last decades has far outpaced the cost of necessities in the time period shown. 50 Household savings rate is high: debt reduction possible Source: Norges Bank (Norwegian Central Bank) Monetary Policy Report 1/2017

45 Norwegian legal framework for Covered Bonds Specialist banking principle Only specialised institutions whose articles of association comply with prescribed mandatory requirements may issue covered bonds. LTV limits 75% for residential mortgages. 60% for commercial mortgages. Assets The Cover Pool may consist of mortgaged real estate assets, public sector loans and substitute assets (max 20% of Cover Pool, 30% with the Norwegian FSA approval). Matching requirement Special supervision Over- collateralisation Liquidity requirement Currency risk 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. The Norwegian FSA 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 Norwegian FSA. Voluntary over-collateralisation 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. SR-Boligkreditt will fully hedge currency risk. Interest rate risk Issuer insolvency Interest rate risk must be analysed (rate curve shifts and twists). SR-Boligkreditt will hedge 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. 45

46 A B Norwegian mortgage market Additional information SpareBank 1 SR-Bank 46

47 Impairment losses on loans and guarantees Losses on loans in income statement (MNOK) Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Corporate customers Retail customers Change in collective impairment losses on loans Total impairment IFRS 9 loans and guarantees* - Net impairment losses on loans Impairment losses on loans (MNOK) Corporate customers Retail customers Collective impairment losses on loans Total impairment IFRS 9 loans* 669 Total impairment IFRS 9 guarantees* 121 Total impairment losses on loans IFRS 9 Financial Instruments replaced IAS 39 from 1 January 2018.

48 Net commission and other income MNOK Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Payment facilities Savings/placements Insurance products Commission income real estate broking Guarantee commission Arrangement- and customer fees Accounting services SpareBank 1 Regnskapshuset SR Other Net commission and other income excl. covered bond companies Commission income SB1 Boligkreditt and SB1 Næringskreditt Net commission and other income incl. covered bond companies

49 Net income on investment securities MNOK Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Dividends Investment income, associates Securities gains/losses of which capital change in shares and certificates of which capital change in certificates and bonds of which derivatives; bonds and certificates Currency/interest gains/loans of which currency customer- and own-account trading of which value change basis swap spread of which counterparty risk derivatives including CVA of which IFRS-effects Net income on investment securities

50 Subsidiaries Subsidiaries MNOK EiendomsMegler 1 SR-Eiendom AS Number of sales Operating profit before tax 0 5 SR-Forvaltning AS Capital under management (BNOK) Operating profit before tax 9 8 FinStart Nordic AS* Operating profit before tax 23 0 SpareBank 1 Regnskapshuset SR AS Operating profit before tax** 1 2 SR-Boligkreditt AS Operating profit before tax Other Operating profit before tax Total subsidiaries Operating profit before tax *In September 2017, SR-Investering AS changed its name to FinStart Nordic AS. Start up on 1 January The company will be a start-up factory for new ideas and the venture will challenge the bank's own business models. ** The result to Regnskapshuset SR includes amortization of intangible assets of NOK 0.5 million (NOK 0.5 million per ).

51 Ownership interests Ownership interests MNOK SpareBank 1 Gruppen AS Interest ownership 19,5 % 19,5 % Profit after tax Adjusted profit previous years 0-4 SpareBank 1 Boligkreditt AS* Interest ownership 8,0 % 13,9 % Profit after tax 1-18 Adjusted profit previous years 0 0 SpareBank 1 Næringskreditt AS Interest ownership 19,2 % 21,9 % Profit after tax 2 5 BN Bank ASA Interest ownership 23,5 % 23,5 % Profit after tax SpareBank 1 Kredittkort AS Interest ownership 17,9 % 17,9 % Profit after tax 6 2 SpareBank 1 Betaling AS** Interest ownership 19,7 % 19,7 % Profit after tax -3-5 Adjusted profit previous years -6-7 Other Profit after tax 1-2 Total ownership interests Profit after tax *From 1 January 2018, the company has changed its accounting policies for the recognition of the effects of basis swaps due to the implementation of IFRS 9. The effects of basis swaps are now recognised through other comprehensive income in SpareBank 1 Boligkreditt AS and thereby do not affect the company's after tax profit or the group's share of the profit. **On 1 September 2017 mcash merged with Vipps, DNB's payment solution (mobile). SpareBank 1 banks became after the merger with Vipps, the second largest shareholder in Vipps with a stake of 25%.

52 Operating expenses MNOK Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Personnel expenses Restructuringcosts Total personnel expenses IT expenses Marketing Other administrative expenses Total administrative expenses Depreciation Operating expenses from real estate Other operating expenses Total other operating expenses Total operating expenses

53 SpareBank 1 SR-Bank has a well diversified portfolio 6.5% (7.1%) of total EAD is related to oil operations SpareBank 1 SR-Bank* has total BNOK (209.3) EAD per BNOK 13.7 (14.8) EAD is related to oil operations Corporate market excl. oil operations; 27,5% (26,6% Oil service; 1,9% (2,1%) Retail market; 66,0% (66,3%) Oil operations; 6,5% (7,1%) Exploration and production companies; 0,7% (0,8%) Offshore; 3,9% (4,2%) EAD: Exposure at default Figures as at Figures in parentheses as at *Include portfolio in covered bond company (SpareBank 1 Boligkreditt AS and SR-Boligkreditt AS). 53

54 Oil services - total NOK 4.0 billion (NOK 4.3 billion as at ) Exploration and concept studies EAD NOK 0.3 billion Average weighted probability of default 2.7% Field development and start-up drilling EAD NOK 0.8 billion Average weighted probability of default 3.2% Oil services EAD NOK 4.0 billion, 1.9% of the bank's total EAD Average weighted probability of default for the oil services portfolio is 4.8% Funding of operating capital through current and fixed assets, as well as guarantees Other oil service; MNOK 400 (MNOK 400) Exploration and concept studies; MNOK 315 (MNOK 305) Operational fields and operational drilling EAD NOK 2.2 billion Average weighted probability of default 5.9% On shore facilities; MNOK 317 (MNOK 313) Field development and startup drilling; MNOK 834 (MNOK 850) On shore facilities EAD NOK 0.3 billion Average weighted probability of default 4.5% Other oil services EAD NOK 0.4 billion Fields and operation drilling; MNOK (MNOK 2.436) 54

55 Oil and gas - total NOK 1.5 billion (NOK 1.7 billion as at ) Exploration financing EAD NOK 0.2 billion Average weighted probability of default 1.2% Secured by a tax refund from the Norwegian State. No direct oil price risk Reserve based lending (RBL) EAD NOK 1.3 billion Average weighted probability of default 1.4% Structured financing based on assumptions relating to reserves, production volume, investments, oil prices, etc. The basis for loans is adjusted semi-annually based on a review of total assumptions Exploration and production companies EAD NOK 1.5 billion, 0.7% of the bank's total EAD Average weighted probability of default for the oil and gas portfolio is 1.4% Exposure primarily to companies with activities on the Norwegian continental shelf Exploration financing; MNOK 186 (MNOK 146) Reserve Based Financing; MNOK (MNOK 1.601) 55

56 Offshore - total NOK 8.2 billion (NOK 8.7 billion as at ) Offshore Service Vessels Rig EAD NOK 5.7 billion, average weighted probability of default is 3.1%, weighted average age is 8.7 years, average weighted contract coverage for 2018 and 2019 of 57% and 29% respectively, average weighted LTV 97%, 82 vessels EAD NOK 1.7 billion, average weighted probability of default is 3.4%, weighted average age is 7.9 years, average weighted contract coverage for 2018 and 2019 of 71% and 52%, average weighted LTV 77%, 18 rigs Offshore EAD NOK 8.2 billion, 3.9% of the bank's total EAD Average weighted probability of default for the offshore portfolio is 2.9% Exposure primarily to industrial-oriented shipping companies with strong ownership and integrated organisation Rig; MNOK (MNOK 1.536) Seismic vessels EAD NOK 0.8 billion, average weighted probability 0.9%, weighted average age is 13.4 years, average weighted contract coverage for 2018 and 2019 of 64% and 64% respectively, average weighted LTV 97%, 7 vessels Applies to ship financing, not seismic equipment Seismic; MNOK 797 (MNOK 898) Offshore Service Vessels; MNOK (MNOK 6.315) 56

57 EAD NOK million Offshore Service Vessels total NOK 5.7 billion (NOK 6.3 billion as at ) Offshore Service Vessels Most customers with long history as a borrower in SpareBank 1 SR-Bank EAD per age of OSV excl. accomodation Most of the companies are listed on stock exchange or family owned A major part is industrially focused companies, only a small number of financially oriented owners Accommodation; MNOK 728 (MNOK 768) Standby; MNOK 492 (MNOK 501) PSV; MNOK (MNOK 2.343) AHTS; MNOK 608 (MNOK 621) Subsea;MNOK (MNOK 2.082) >15 Year 57

58 Customer Offshore Service Vessels largest customer group Well diversified portfolio. One commitment of NOK 1.0 billion, rest of NOK 750 or lower. Total EAD for the portfolio is NOK 5.7 billion of which; NOK 5.3 billion consists of 13 restructured commitments NOK 0.1 billion consists of 1 commitment under consideration NOK 0.3 billion consists of 2 commitments where it is not required Financing of 82 vessels, all with 1. priority pledge Number of vessels EAD NOK million 58 Restructured Under consideration Not required

59 Lending to commercial property Lending to commercial property NOK 27.7 billion, 14.6% of the bank s total loans. The portfolio is characterised by lending to commercial properties for leasing with long-term contracts and financially solid tenants. The vacancy rate is limited. Interest rates for a significant portion of this portfolio have been hedged. Housing cooperative; 3,3% (4,7%) Real estate management; 3,0% (1,7%) Development and sale of real estate; 15,3% (19,7%) Letting of real estate; 64,2% (62,2%) Purchase and sale of real estate; 14,2% (11,7%) 59 Sector allocation in accordance with the standard categories from Statistics Norway.

60 Loan to value ratio on home mortgage loans The proportion of loans with a loan-to- value ratio of less than 85% is high. 88.8% of the exposure is within 85% of the assessed value of collateral. 100% 80% 60% 64,6% 59,8% 40% 26,0% 29,0% 20% 0% 5,9% 7,3% 3,5% 3,9% Below 70 % % % Above 100 % In a total-distributed loan to value ratio, the entire loan is allocated to one and the same interval. The figures include the loan portfolio in the covered bond companies (SpareBank 1 Boligkreditt AS and SR-Boligkreditt AS)

61 Risk profile of the loan portfolio SpareBank 1 SR-Bank has a solid loan portfolio. 60.3% of the bank s loan exposure has a PD* below 0.5%. Single loan exposures less than NOK 10 million aggregates 68.5% of total loan portfolio. Single loan exposures above NOK 250 million is 10.3% of total loan portfolio. 100% 80% 60% 40% 20% 0% Distributed by risk class 59,3% 60,3 % 31,0% 29,6 % 9,7% 10,1 % Probability of Default (PD) % % Distributed by size of loan 80% 60% 68,8 % 68,5 % *Probability of default (PD) through a full cycle of loss. The figures include the loan portfolio in the covered bond companies (SpareBank 1 Næringskreditt AS, SpareBank 1 Boligkreditt AS and SR-Boligkreditt AS). 40% 20% 0% 13,0 % 13,5 % 7,6 % 7,7 % 10,6 % 10,3 % Below MNOK 10 MNOK MNOK Above MNOK

62 NOK M Risk profile Lending to the retail market The quality of the retail market portfolio is considered to be good and has low potential losses. The proportion of loans with a PD* below 0.5 % is 80.7 % of the total retail portfolio. The low risk profile is achieved through prudent costumer selection and requirements for moderate LTV. Most of the portfolio is secured against a mortgage on real estate, and lending is overall moderate compared to asset value. 100% 80% 60% 40% 20% 0% Retail market portfolio distributed by risk class 2,9% 2,6% 2,6% 2,7% 2,6% 18,8% 16,3% 16,4% 16,6% 16,7% 78,3% 81,1% 81,0% 80,7% 80,7% PD % PD % PD % Merged portfolio from SpareBank 1 SR-Finans consists of object and consumer finance, which has a higher risk than the bank s portfolio of lending secured by real estate Migration in the retail market portfolio over the past 12 months *Probability of default (PD) through a full cycle of loss. The figures include the loan portfolio in the covered bond companies (SpareBank 1 Boligkreditt AS and SR-Boligkreditt AS) Exit Additions Change in existing portfolio Total change 62

63 RWA home mortgages RWA on home mortgages reflects a solid and stable portfolio. 22,5 % 21,7 % RWA home mortgages 21,3 % 21,6 % 21,7 % 20,0 % 15,0 % 10,0 % 5,0 % Home mortgages as defined in the Norwegian IRB framework; residential property must make up at least 30 % of a loan s security. The figures include the loan portfolio in the covered bond companies (SpareBank 1 Boligkreditt AS and SR-Boligkreditt AS). 0,0 %

64 NOK M Risk profile Corporate lending The quality of the corporate market portfolio is good. There is a clearly defined framework that sets limit on what is funded and conditions for particular funding purposes. This ensures a robust portfolio. Merged corporate lending portfolio from SpareBank 1 SR-Finans from 1 January 2017 primarily consists of leasing, and has approximately the same risk profile as the bank s portfolio. The share of costumers with PD* below 0.5 % is at 19.8 %. 100% 80% 60% 40% 20% 0% Bedriftsmarkedsporteføljen fordelt på misligholdsklasser 23,3% 22,3% 24,4% 27,6% 25,0% 55,7% 56,6% 55,0% 53,1% 55,2% 21,0% 21,1% 20,6% 19,3% 19,8% PD % PD % PD % Migration in the corporate lending portfolio over the past 12 months *Probability of default (PD) through a full cycle of loss. The figures include the loan portfolio in the covered bond companies (SpareBank 1 Næringskreditt AS) Exit Additions Change in existing portfolio Total change 64

65 Millions NOK Index 100= mar.31th 2017 SRBANK share International ownership is 23.8 % per 1. quarter Total market value at 1. quarter 2018 is NOK 22.0 billion Price P/B Development in Price/Book 30 0,4 Mar. 17 May. 17 Jul. 17 Sep. 17 Nov. 17 Jan. 18 Mar. 18 1,4 1,2 1,0 0,8 0,6 p/b Relativ share price development OSEBX 70 SRBANK 50 Mar. 17 May. 17 Jul. 17 Sep. 17 Nov. 17 Jan. 18 Mar. 18 1,2 1,0 0,8 0,6 0,4 0,2 Volume (# shares) (r.s.) Volume (20 days moving average)(l.s.) Trading volume development 0,0 Mar. 13 Sep. 13 Mar. 14 Sep. 14 Mar. 15 Sep. 15 Mar. 16 Sep. 16 Mar. 17 Sep. 17 Mar. 18 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Millions 65

66 20 largest shareholders as at March 2018 Ownership interests: From Rogaland, Agder-counties and Hordaland: 44.6% (46.7%) International: 23.8% (22.5%) 10 largest: 49.6% (45.4%) 20 largest: 57.1% (53.1%) Number of shareholders : (10 726) Employees owning 1.6% (1.7%) Figures in parentheses as at Investor Number Stake Sparebankstiftelsen SR-Bank ,3% Folketrygdfondet ,7% State Street Bank and Trust Co, U.S.A. Nominee ,6% SpareBank 1-stiftinga Kvinnherad ,4% Vpf Nordea Norge Verdi ,3% Danske Invest Norske Instit. II ,4% Verdipapirfondet DNB Norge (IV) ,4% Odin Norge ,3% JPMorgan Chase Bank N.A., UK Nominee ,1% Clipper AS ,0% State Street Bank and Trust Co, U.S.A. Nominee ,9% Pareto Aksje Norge ,9% KAS Bank NV, Nederland Nominee ,8% Danske Invest Norske Aksjer Inst ,8% JPMorgan Chase Bank N.A., U.S.A. Nominee ,8% JPMorgan Chase Bank N.A., UK Nominee ,7% KLP Aksjenorge Indeks ,7% Westco AS ,7% Pareto AS ,6% Vpf Nordea Norge Avkastning ,6% Top ,3% Top ,6% Top ,1% 66

67 Contact details Morten Forgaard Bjørn Endre Oftedal Direct line: Mobile: Dag Hjelle Lene Vaaland Direct line: Mobile: Address: Bjergsted Terrasse 1 Postboks Stavanger Web-site: 67