SpareBank 1 Sørøst-Norge

Earnings Release • Feb 9, 2023

Good underlying operations in Q4 and 2022

Good underlying operations in Q4 and 2022

SpareBank 1 Sørøst-Norge posted a profit after tax of NOK 343 million for the fourth quarter, compared with NOK 261 million for the fourth quarter of 2021 (pro forma for SpareBank 1 BV, Sparebanken Telemark and SpareBank 1 Modum). The return on equity for the fourth quarter was 10.9% (9.0%)*.

The profit after tax for 2022 was NOK 1 067 million, compared with NOK 1 152 million pro forma for 2021. The return on equity for 2022 was 8.8% (10.4%), or 9.6% (10.1%) adjusted for one-off effects related to the mergers in 2021 and 2022.

The Board of Directors is proposing dividends/gifts totalling NOK 600 million, corresponding to NOK 2.60 (NOK 2.50) per equity certificate (NOK 364 million in total) and NOK 236 million in gift funds for community capital. Based on the Group’s extremely good financial strength, even after the ordinary dividend for equity certificate holders and gift funds for community capital, the Board of Directors will propose to the Supervisory Board that the Board of Directors be authorised to pay an additional dividend to the Bank’s equity certificate holders and for gifts to good causes if the financial situation so permits. An additional dividend of up to NOK 1.50 per equity certificate is proposed, which corresponds to NOK 210 million in dividends and NOK 136 million in gifts via community capital. The Board will consider whether there is a basis for

paying out a possible additional dividend/gifts during the third quarter of 2023.

Despite the fact that 2022 was a year of mergers for SpareBank 1 Sørøst-Norge, the Group has delivered good results with good growth in net interest and commission income. The results were affected by merger-related costs, SpareBank 1 Gruppen’s weak results and negative returns on the securities portfolio due to turbulent financial markets, despite an improvement in the fourth quarter.

Net interest income including commission income from mortgage credit institutions grew by (pro forma) 10% in the fourth quarter and 14% in the past 12 months. The policy rate was increased six times in 2022. The increases in lending and deposit rates resulting from this strengthened the Bank’s net interest income. The most recent change in rates in December 2022 did not take effect for the retail market until the end of January 2023, while they took full effect for corporate market customers at the start of January 2023.

Negative deposit and loan growth during the fourth quarter, but moderate growth for the year. Lending growth in the quarter of -0.6% compared with 0.9% in the same period the year before. Lending growth for 2022 was 2.5%, compared with 6.4% for 2021. Lending growth in the retail market for 2022 was 1.9%, while the corporate market saw growth of 4.4%.

Other commission income grew by (pro forma) 16% in the past 12 months due to good growth in payment services and sales of life and non-life insurance products.

The parent bank and the Group maintain a strong focus on cost management. The Group has introduced a cost-income ratio target as a means of measuring profitability on the path to a return on equity of 11%. The cost-income ratio has been set at less than 40% for the Group. The cost-income ratio for 2022, excluding one-off costs, was 45% (44%). A programme will be implemented to increase profitability and reduce costs in the Group in 2023.

The quality of the loan portfolio is good, which is confirmed by the low losses on loans and guarantees. At the end of the year, the loss cost was NOK 40 million (0.05% of gross loans on the balance sheet), NOK 10 million of which was linked to accounting effects (IFRS 9) when recognising losses in Stage 1 in connection with the merger with SpareBank 1 Modum and NOK 12 million due to increased scenario weights in the corporate market, linked to greater uncertainty about macroeconomic developments.

The Bank adjusted its lending and deposit rates following Norges Bank’s interest rate decisions in November and December. The first change took full effect from the end of December, while the second change did not take full effect until the end of January 2023. A general rise in market rates is expected to improve the Group’s interest rate margin and earnings. Higher interest rates going forward may lead to lower credit growth and greater competition, especially in the residential mortgage segment, which has already been seen to some extent in the fourth quarter.

At the end of the year, the proportionally consolidated Common Equity Tier 1 capital ratio was 19.5% (18.6% pro forma) and the leverage ratio was 8.5% (8.5% pro forma). Capital adequacy calculations take account of the expected dividend, both the ordinary pay out and the possible additional pay out. See comments above.

Highlights for Q4 2022 (figures in brackets relate to pro forma for Q4 2021)

• Ordinary profit after tax of NOK 343 million (NOK 261 million)

• Return on equity of 10.9% (9.0%)

• Net interest income, inclusive of mortgage credit institutions, of NOK 501 million (NOK 413 million)

• Improved financial result of NOK 129 (65) million

• Moderate growth in operating expenses, excluding one-off merger costs, of NOK 354 million (NOK 347 million) One-off merger costs of NOK 15 million (NOK 5 million)

• Losses on loans and guarantees, exclusive of merger effects, of NOK 29 million (NOK -2 million)

• Lending and deposit growth in the past quarter was -0.6% (0.9%) and -1.3% (-1.0%), respectively

Highlights for 2022 (figures in brackets relate to pro forma for 2021)

• Ordinary profit after tax of NOK 1 067 million (NOK 1 152 million)

• Return on equity 8.8% (10.4%), adjusted for one-time effects 9.6% (10.1%)

• The Board is proposing a cash dividend for equity certificate holders of NOK 2.60 (2.50) per equity certificate, totalling NOK 364 (297) million, and gift funds for community capital amounting to NOK 236 (196) million.

• The Board is also proposing an additional dividend of NOK 1.50 per equity certificate, totalling NOK 210 million, and additional gift funds for community capital amounting to NOK 136 million.

• Net interest income, inclusive of mortgage credit institutions, of NOK 1 795 million (NOK 1 568 million)

• The weak result from SpareBank 1 Gruppen and turbulent financial markets in 2022 affected the financial result, which was NOK 177 (304) million, excluding income recognition of negative goodwill in 2021 of NOK 151 million

• Operating expenses, excluding one-off merger costs, of NOK 1 216 million (NOK 1 187 million) One-off merger costs of NOK 114 million (NOK 68 million)

• Losses on loans and guarantees, exclusive of merger effects, of NOK 30 million (NOK -1 million)

• Lending and deposit growth in the past 12 months of 2.5% (6.4%) and 1.2% (7.4%), respectively

• Very good financial strength with Common Equity Tier 1 capital of 19.5% (18.6%) in the Group

The full quarterly report can be downloaded from the Bank’s website sparebank1sorost.no

*) Figures in brackets indicate the amount for the corresponding period in 2021 pro forma for SpareBank 1 Sørøst-Norge.

Sandefjord, 09.02.2023

For further information:

Per Halvorsen, CEO, Tel. +47 934 07 441

Roar Snippen, CFO/IR, Tel. +47 976 10 360

This information must be disclosed pursuant to section 5-12 of the Securities Trading Act.