SpareBank 1 Sørøst-Norge

Earnings Release • Feb 8, 2024

Preliminary annual results and results for the fourth quarter of 2023

We come together to create SpareBank 1 Sør-Norge

«Business as usual» until completion

Results for the fourth quarter and preliminary annual results of 2023

Increased net interest income and loan loss reversals in Q4 2023

• Net interest income, including commission income from credit institutions, increased by 3 percent (NOK 15 million) in the quarter.
• Net commission income reduced by 2 percent (NOK 2 million) in the quarter.
• Reduced income from subsidiaries by NOK 13 million in the quarter.
• Weak financial results due to a negative outcome from SB1 Gruppen -17 mnok and valuation of fixed-rate loans and derivatives. The dividend from SB1 Finans Midt Norge for the year 2022 has been recognized in the fourth quarter (NOK 19 million)
• Increased costs excl. one-time cost by NOK 40 million this quarter. Increased costs are mainly attributed to bonus provisions for 2023, as well as some increased expenses related to alliance, IT, and consultancy costs, especially associated with the crisis management project.
• Income recognition of losses this quarter amounted to NOK 42 million hence change in scenario weigthing NOK 8 million in corporate market. Confirmed losses (net) NOK 6 million in Q4
• The result in the fourth quarter was NOK 301 million.
• Common equity tier 1 capital adequacy ratio for the group is 19.4 percent, and the leverage ratio is 8.5 percent
• Return on equity for the quarter was 9.3 percent, compared to 9.4 percent in the previous quarter. Taking one-off costs into account, the return on equity in the quarter is 9.8 percent
• Earnings per share for the group this quarter is NOK 1.27 and NOK 1.30 in the parent bank.

Increased net interest income and loan loss reversals

Development of results from the corporate and personal markets

*Results excl. One-off cost

Increased volume weigthed interest margin

1) Interest on lending includes loans transferred to mortgage co 2) 3M NIBOR is calculated as average 3M NIBOR in the quarter

Improved lending margins, but reduced deposit

Moderate cost growth adjusted for one-time costs

Solid annual result

Solid annual result with increased net interest income and income recognition of losses, but weak growth

• Net interest income, including commission income from credit institutions, increased by 21 percent (NOK 369 million).
• Net commission income reduced by 6 percent (NOK 2 million).
• Reduced income and results by NOK 13 million.
• Increased income from subsidiaries by NOK 8 million. Full-year impact of acquiring the accounting firm in 2022. Reduced income from real estate brokerage by NOK 24 million.
• Weak financial results due to a negative outcome from SB1 Gruppen -11 mnok and valuation of fixed-rate loans and derivatives. The dividend from co-owned companies is reduced by NOK 30 million in 2023.
• Increased costs excl. one-time cost by NOK 90 million this year. Increased costs are mainly attributed to increased expenses related to alliance, IT, reduced wealth tax and consultancy costs for the implementation and compliance with regulatory requirements, as well as underlying salary and price growth
• Income recognition of losses this quarter amounted to NOK 57 million hence change in scenario weigthing NOK 8 million in CM. Confirmed losses (net) NOK 2 million this year
• The result for 2023 was NOK 1 310 million

• Dividend per share NOK 3.88

• Common equity tier 1 capital adequacy ratio for the group is 19.4 percent, and the leverage ratio is 8.5 percent
• Return on equity for 2023 excl. one-time cost was 10.4 percent, compared to 9.6 percent in 2022.
• Earnings per share for the group this year is NOK 5.47 and the parent bank NOK 6.05

Key figures and financial targets

Top-line Growth and Collaboration Cost control Risk profile

Capital Optimization Dividend Policy AIRB

EMTN Program

Return

Equity

Board of direktor's proposal for dividend

Dividends for 2023 are regulated in point 5.3 of the merger plan. The level of dividend is based on the agreed exchange ratio of 68.88 % to SpareBank 1 SR-Bank and 31.12 % to SpareBank 1 Sørøst-Norge. This means that the size of SOON's dividend for 2023 will be indirectly determined by SR-Bank. The total dividend is based on the dividend decided by SR Bank ("SR Dividend"). The total dividend is then determined as follows:

➔ SR-Dividend / 0,6888 = Total Dividend

SOON can then distribute an amount in dividends and gifts limited to 31.12 % of the Total Dividend. Dividends for SOON are therefore calculated using the following formula:

➔ Sørøst-Norge Dividend = 0,3112 * Total Dividend

Dividend last 2 years og price performance SOON

Strong operational performance and high solvency

Good annual result for BN Bank. Negative results from SB1 Gruppen

• SpareBank 1 Gruppen has implemented IFRS 17 and IFRS 9 per 1.1.2023. Comparable numbers for 2022 have not been restated to IFRS 17 and IFRS 9.
• SpareBank 1 Gruppen's consolidated net profit after tax for the year 2023 were NOK 246 (1,428) million. The majority's share of the consolidated net profit after tax for the year 2023 were NOK -174 (1,020) million
• SpareBank 1 Gruppen AS has conducted a valuation of the jointly controlled company, Kredinor AS. The updated valuation results in an impairment of the ownership stake and has a negative impact on SpareBank 1 Gruppen's parent and consolidated net profit of NOK 769 million in the 4th quarter of 2023 and for the year 2023.
• A good result for Fremtind AS and SpareBank 1 Forsikring AS, however, contributes positively and offsets parts of the write-down of the equity stake in Kredinor.

Well-diversified portfolio –99.0 percent in stages 1 and 2

No material changes in the composition of the corporate market portfolio

• Increased in the portfolio compared to the previous quarter from 25.3 BNOK to 25.2 BNOK
• Marginal changes within the various industry sectors
• Continued limited number of new construction projects
• Certain completed construction projects are facing challenges in selling unsold apartments. The bank has in total a low LTV on unsold units in real estate projects (60 percent or lower)
• No significant change in loans with deferred repayments, but some more financings related to land/development properties have been sought for extension due to delayed commencement of planned projects.
• Weak reduction in defaulted and written-down commitments last quarter. A slight increase in commitments overdue between 30 and 60 days, but still low payment defaults in the BM portfolio.
• Weighted PD on fresh engagements is on same level as in the previous quarter

Collective efforts for the community

• The "banks" five foundations allocated almost 190 million NOK to charitable purposes in 2023, compared to just over 100 million NOK in 2022. In addition, the bank provided direct gifts and sponsorships totaling 20 million NOK.
• The distribution across various sectors from the foundations is shown in the figure, where nearly 40 percent is allocated to sports, physical activity, and outdoor recreation

The unemployment rate remains low, but is increasing

Source: NAV. The percentage of completely unemployed

Well positioned in an attractive region

1) Source: Telemarksforskning, K. Vareide. Regional analysis Sørøst-Norge. Buskerud, Telemark, Vestfold. Percentage growth 2013-22

2) Source SSB. County-level national accounts. Gross Domestic Product at current prices. Vestfold and Telemark

22 3) Source : Eiendomsverdi. Regionsrapport 4th quarter 2023 Together we create value

Appendix

Increased net interest income

• Increased net interest income by 12,2 percent from the same quarter in 2022 and 2.7 percent compared to the previous quarter
  • driven by higher market interest rates

The bank has adjusted customer rates following changes in the Central Bank's interest rates

Norges Bank	15. des.	23. mar.	4. mai	22. jun.	17. aug.	21. sept.	14. des
	22	23	23	23	23	23	23
Effect new loans	20. des.	29. mar.	10. mai	27. jun.	22. aug	27. sep.	09. jan.
	22	23	23	23	23	23	24
Existing corporate	3. jan.	13. apr.	25. mai	12. jul.	6. sep.	12. okt.	24. jan.
loans and deposits	23	23	23	23	23	23	24
Existing retail loans	31. jan.	11. mai	22. jun.	9. aug.	23. okt.	28. nov.	10. mar.
and deposits	23	23	23	23	23	23	24

Increased net interest income, while income from subsidiaries has decreased in the quarter

Increased operating costs

mainly due to alliance costs, ICT, consultant costs for implementation and compliance with regulatory requirements as well as underlying wage and price growth.

Increased operating costs in the subsidiaries are due to the acquisition of the accounting firm Grenland Gruppen AS with full effect from 2023 as well as general price and salary growth both at brokers and in the

Increased cost ratio mainly as a result of lower financial income in the fourth quarter

• Lower financial and other income is due to negative results from SpareBank 1 Gruppen. Lower income from property brokerage contributes to an increased cost ratio in addition to generally increased costs in the fourth quarter.
• The cost ratio in the parent bank is 36.8 percent for the year, while for the group it is 44.6 percent.

Increased return on equity and high equity ratio

Reduced in deposits in the 4th quarter

73 percent of the bank's deposits are within the Deposit Guarantee Scheme – 39 percent CM and 90 percent RM

Lending and deposit volumes with pt-, fixed and NIBOR rates

Big proportion of loans to the retail market

No major changes from the previous quarter in the distribution of the corporate market by sector and geography

The bank has a solid overweight position in favorable risk class within the corporate market portfolio

Low leverage on commercial loans secured on property (total-distributed)

• The average LTV on commercial loans secured on property including loans transferred to SB1 Næringskreditt and housing cooperatives is 39.7 %, while LTV on own balance sheet is 40.3 %. LTV ex. Housing cooperatives is 52.1 %
• Commercial loans secured on property inc. housing cooperatives is approx. 17 BNOK and 12 BNOK ex. housing cooperatives

1) The calculation of LTV is based on the market value of the collateral. With total-distributed LTV, the whole of the loan is assigned to the same interval. The figures include portfolio transferred to SpareBank 1 Næringskreditt AS.

Low leverage on commercial loans secured on property (interval-distributed)

1) LTV interval-distributed: The calculation of LTV is based on the market value of the collateral. In the case of interval-distributed LTV, the loan will be distributed / split within the specific intervals in the graph interval. The figures include portfolio transferred to SpareBank 1 Næringskreditt AS

Low risk in the mortgage portfolio (total-distributed)

38

• The average LTV on the mortgage portfolio incl. loans transferred to SB1 Boligkreditt is 48,2 % which is an increase of 1,1 percentage point compared to the previous quarter (47.1 %)
• Similarly, LTV on own balance sheet has increased from 51,8 % at the end of last quarter to 52.8 % at the end of this quarter

1) Loan-to-value ratio for mortgages incl. BK – LTV total-distributed: The calculation of LTV is based on the market value of the collateral. With total-distributed LTV, the whole of the loan is assigned to the same interval. The figures include portfolio transferred to SpareBank 1 Boligkreditt AS

Low risk in the mortgage portfolio (interval-distributed)

1) Loan-to-value ratio for mortgages incl. BK – LTV interval-distributed. Retail customers with a mortgage on property; lending volume as a percentage of total collateral. LTV is interval-distributed by distributing/splitting individual loans within the specific intervals in the graph

Retail market portfolio is stable over time, has a solid overweighting and positive trend in good risk classes

Good quarter for BN Bank. Negative results from SB1 Gruppen

• SpareBank 1 Gruppen has implemented IFRS 17 and IFRS 9 per 1.1.2023. Comparable numbers for 2022 have not been restated to IFRS 17 and IFRS 9.
• SpareBank 1 Gruppen's consolidated net profit after tax for the 4th quarter were NOK 60 (518) million. The majority's share of the consolidated net profit after tax for the 4th quarter were NOK -260 (467) million.
• SpareBank 1 Gruppen AS has conducted a valuation of the jointly controlled company, Kredinor AS. The updated valuation results in an impairment of the ownership stake and has a negative impact on SpareBank 1 Gruppen's parent and consolidated net profit of NOK 769 million in the 4th quarter of 2023 and for the year 2023.

LCR portfolio 31.12.2023

24% 42% 34% Level 1 A Level 1 B Level 2 A

• The LCR portfolio end of the year was of 9.8 BNOK, of which short term placement on 0.8 BNOK. Credit duration of 2.5 years and 1.5 month in short portfolio

• LCR of 202 (263) % and 236 (175) % average in 2023.
• The bank's liquidity position at the end of the year is very strong

Good spread in the banks funding

Development in Equity Certificates of SOON

	NOK	31.12.23	30.09.23	30.06.23	31.03.23	31.12.22
	Share price	64,00	51,00	50,60	50,00	55,00
	Market value (mnok)	8.966	7.145	7.089	7.005	7.411
	Book equity per equity certificate (group)	55,00	53,78	53,57	51,90	55,50
	Earnings per equity certificate (group ytd	5,47	4,29	3,01	1,36	4,27
	Price/book equity (group)	1,16x	0,95x	0,94x	0,96X	1,03X
	Dividend per EC	3,88				2,60
	Additional dividend per EC					1,50
1.4.23 1.7.23 1.10.23 1.1.24	Dividend yield	5,7 %				7,5%

20 Biggest owners of equity certificates

20 Biggest owners of equity certificates

		% av totalt antall EK
De 20 egenkapitalbeviseierne per 30.09.2023 største	Antall	bevis
SPAREBANK 1 STIFTELSEN BV	24.141.356	17,2 %
SPAREBANKSTIFTELSEN TELEMARK	18.910.174	13,5 %
SPAREBANKSTIFTELSEN SPAREBANK 1 MODUM	18.444.646	13,2 %
NØTTERØY-TØNSBERG SPAREBANKSTIFTELSEN	10.925.503	7,8 %
SPAREBANKSTIFTELSEN TELEMARK - HOLLA OG LUNDE	10.273.723	7,3 %
VPF EIKA EGENKAPITALBEVIS	4.169.991	3,0 %
SPESIALFONDET BOREA UTBYTTE	3.866.798	2,8 %
PARETO NORGE INVEST AS	2.757.852	2,0 %
BRANNKASSESTIFTELSEN MIDT-BUSKERUD	2.659.369	1,9 %
KOMMUNAL LANDSPENSJONSKASSE GJENSI	1.580.645	1,1 %
CATILINA INVEST AS	912.032	0,7 %
WENAASGRUPPEN AS	907.432	0,6 %
Landkreditt Utbytte	903.455	0,6 %
MELESIO INVEST AS	886.937	0,6 %
SANDEN EQUITY AS	707.494	0,5 %
FORETAKSKONSULENTER AS	621.230	0,4 %
SKOGEN INVESTERING AS	605.000	0,4 %
AARS AS	484.737	0,3 %
HAUSTA INVESTOR AS	420.000	0,3 %
TROVÅG AS	418.792	0,3 %
Sum 20 eiere av egenkapitalbevis største	104.597.166	74,7 %

• At the end of the year, the number of quity certificate holders is 5 776 (5 961).
• The 20 largest owners are listed with 74.7 % of the ownership capital. Of this, the five savings bank foundations own 59.0 %
• At the end of the quarter, the price of the bank's equity certificate was 64.00 nok

Corporate social responsibility and sustainability

SpareBank 1 Sørøst-Norge will be responsible by preventing and detecting financial crime, be climate proactive and help customers be the same and be socially engaged

Monthly meetings in the sustainability council Updates and next steps per department

Green portfolio Green bonds of 4.6 BNOK¹ Green investments of 1.2 BNOK² Green mortgages of 2.8 BNOK³

Responsible business

Preventing financial crime All employees are involved in the group ESG effort and takes actions for sustainability in own house Competence enhancement The Group's property strategy takes sustainability into account

Equality, diversity and inclusion The Equality, Diversity and Inclusion policy was adopted in the first quarter

1) Per end of quarter (22% of the bank's external funding

46 2) 13.8% of total liquidity portfolio

3) 3.9% of total lending portfolio on own balance sheet

Contact details

Per Halvorsen CEO

Tel +47 934 07 441 E-mail; Per.Halvorsen@sb1sorost.no

Adresse

Roar Snippen CFO/IR

Tel +47 976 10 360 E-mail; Roar.Snippen@sb1sorost.no

Mona Storbrua Head of treasury (IR)

Tel +47 916 39 833 E-mail; Mona.Storbrua@sb1sorost.no

Address

Fokserødveien 12 Postboks 216 3201 Sandefjord

sb1sorost.no