SØR RESULTS. Improved profitability. Higher deposit coverage. Lending growth. Growth in deposits. Good development in losses.

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1 Sparebanken RESULTS Q2 and H % Lending growth Growth in deposits Higher deposit coverage Good development in losses Improved profitability

2 Sparebanken SØR 1825 Sparebanken Sør has its origin from 1825, when Arendal Sparebank was set up as one of the first six banks in Norway Sparebanken Sør was established in 1984 after a merger between Aust Agder Sparebank, two other savings banks in Aust Agder and nine in Vest Agder. Aust Agder inhabitants square km2 12 branches 2012 Sparebanken Sør is an independent savingsbank with total assets BNOK 42.8 and man years as at 31. June I 1973 the bank merged with four other savings banks in Aust Agder, and formed Aust Agder Sparebank. Vest Agder inhabitants square km 11 branches Going forward > We have supported businesses and people in the region to realize their dreams for more than 180 years, and have thus influenced the local history. Telemark inhabitants square km 6 branches 2007 In 2007 we opened a branch in Bø and 8. October 2008 our first branch in Grenland. In 2008 we established our covered bonds company Sør Boligkreditt AS. As an independent savings bank close to customers and with local decisionmaking, we will be the most important and best bank for the counties of Agder and Telemark. Where you are

3 Highlights Solid deposit growth and sound growth in lending Strengthened net interest and improved lending margins Improved deposit coverage, reduced deposit margins Trend in loan losses continue in the right direction Positive contribution from valuation of financial instruments

4 Key figures Group Profit and loss Q Q H H Net interest and credit commission income Net commission income Other income Operating costs Losses on loans, guarantees Pre tax profit Balance Sheet 1H H Net loans Deposits Total assets

5 Key figures Deposit growth (12 months) Lending growth (12 months) Losses as % of net loans Cost as a % of av. total assets * Costs annualized as % of average total assets

6 Deposit growth Deposit growth (12 months) Deposits vs loans Sør vs M2 3rd quarter in row with deposit growth greater than in lending. 3rd quarter in row with deposit growth higher then the savings rate. * M2 Households, Source SSB

7 Profit and loss Interest income Interest costs Operating costs Pre tax profit

8 Pre tax profit Stable quarterly nominal net interest in a volatile interest rate market.. Net interest per quarter.in combination with stable nominal costs helps ensure strong underlying results. Operating costs per quarter Pre tax profit

9 Development deposits loans Solid growth in deposits gives higher deposit coverage * Deposit coverage as % of net loans

10 Lending and deposit margins Higher lending margins, but still lower deposit margins 1,34 % * Margin relative to 3 months NIBOR

11 Net interest Interest rate adjustments increases net interest 1,56 % * Net interest annualized as % of average total assets

12 Costs One off items affects the costs in the quarter 1,17 % * Costs in % of average total assets ** Normalized, adjusted for AFP in 2010

13 Income Q Q Commission income + 18,4 % Other income + 77,8 % Total 213 MNOK Total 244 MNOK Net interest + 6,4 %

14 Net commission income Commission income is becoming an increasingly important part of the profit for Sparebanken Sør, and constitute in Q2 over 40% of the pre tax profit. Q Net commission income

15 Loans Distribution RBM/CM Distribution Corporate Market Well diversified portfolio that reflects the business activity in the region. Largest growth Q within Transport and Wholesale and retail trade.

16 Lending distribution development Altered ratio between RBM and CM deduces risk in the portfolio Greater diversification in CM reduces exposure to individual industries

17 Risk profile Portfolio according to risk groups RBM 68,0% of portfolio RBM Sør has a high proportion of loans with low risk RBM Sør has a low proportion of loans with high risk Portfolio according to risk groups CM 32,0% of portfolio CM Sør has a moderate to high proportion of loans with low risk CM Sør has a moderate to low proportion of loans with high risk

18 Net non performing and doubtful commitments Increased last quarter, but down from year end

19 Deposit coverage Group Parent bank * Deposit coverage as % of net loans Deposit coverage beyond target level > 56% High deposit coverage in Parent Bank 79,0 %

20 Equity Capital/Core Capital adequacy ratio Return on equity after tax * Return on Equity annualized Tier 1 Capital 12,4 % required > 9 % Repayment of subordinated loan 300 MNOK in Q1 reduces capital adequacy High return on equity Q2

21 Certificates and bonds Assets Rating Total portfolio BNOK 5,8 Liquidity buffers BNOK 3,2 90 % investment grade Liquidity buffers 100 % AAA/AA

22 Maturity structure debt Good access to new funding at reasonable market prices. Improved maturity structure provides greater security under volatile market conditions. Funding > 12 months constitutes 86,9 % Increased maturities on average funding.

23 Stable access to long term funding BNOK Maturity Margin (bp) 3 month NIBOR 2012 Covered bonds 1,7 3,9 53 Senior bonds 2,1 5,6 176 Total 3,8 4,9 122 BNOK Maturity Margin (bp) 3 month NIBOR 2011 Covered bonds 2,5 4,8 55 Senior bonds 3,9 3,4 83 Total 6,4 3,9 72

24 Summary Q Income Costs Improved net interest combined with higher commission income results in positive revenue growth in the quarter. One off items affects the costs in the quarter, but favourable development in loan losses. Liquidity High liquidity buffers and improved deposit coverage. Funding Total Good access to new funding and balanced maturity structure. A positive Q2 where underlying operations in combination with positive effects from valutation of financial instruments contribute.

25 Future prospects Income Growth Costs Equity Macro Implemented interest rate increases will also give positive effects in Q3 and Q4. Opening of a new branch in Skien in august/september will contribute to future growth. Costs related to the establishment of new branches is balanced against implemented cost cutting measures, and shall provide stable underlying development. Issue of Equity Certificates ensures greater flexibility and new opportunities til raise capital when needed. Expectations of continued positive developments in the Norwegian economy, but the situation in Europe contributes to uncerteinty.

26 Sparebanken SØR INSURANCE SØR MARKETS LOAN S Norne Brage Frende We contribute to a better life in the region SAVINGS ABCenter