Sparebanken Møre

Quarterly Report • Jan 27, 2022

Sparebanken Møre Group

Presentation 4th quarter 2021

Runar Sandanger Senior Economist (SVP) Finance 27. January 2022

Contents

• Introduction and highlights
• Outlook and Main Targets
• Results
• Deposits and Loans
• Liquidity and Capital

2021 - highlights

• The bank continues to grow with good development in both lending and deposits
• Net interest income has strengthened throughout the year
• Profitability has improved although cost efficiency is somewhat lower compared to 2020
• Low losses and low risk in the bank's portfolios
• The bank's capital is strong and liquidity remains good

Balance growth

Lending growth was 4.6 per cent over the last 12 months. Growth in deposits was 7.3 per cent

Net Interest Income

In NOK: 1.266 million In per cent: 1.56

Efficiency

Cost/Income ratio at 42.2 per cent in 2021

Losses

NOK 49 million (0.06 per cent) in losses on loans and guarantees

Strong liquidity and solidity

Deposit-to-loan ratio at 59.6 per cent, LCR at 122 and CET1 at 17.2 per cent. Leverage Ratio at 7.7 per cent

Return on Equity

Return on Equity ended at 9.5 per cent for the full year 2021

Strong results in Q4

• The bank continues the positive development and delivers a strong fourth quarter
• Profit after tax ended at MNOK 153 in Q4 2021
• Return on Equity was 9.0 per cent in the quarter compared to 9.1 per cent in Q4 2020

Profit after tax - NOK million

Results 2021

• A good Q4 strengthens the result for 2021
• Profit after tax at the end of the year was NOK 642 million, corresponding to an improvement in profit of 13.2 % compared with last year
• The activity in the bank is good and we have a good momentum into the new year

Profit after tax - NOK million

ROE - in per cent

Dividend– fiscal year 2021

According to the bank's dividend policy, the preliminary annual result for 2021 and the bank`s strong capital, the Board is planning to propose to the General Meeting a cash dividend of NOK 16.00 per equity certificate, a total of NOK 158 million. The corresponding provision for dividends to the local community will amount to NOK 160 million.

Allocation of results for 2021 (Parent bank)

Improved results

Results in 2021 vs. 2020

The bank's net interest income is higher than last year.

Other income reflects inter alia lower mark-to-market valuation of the bank` s LCR portfolio.

The costs are somewhat higher as a result of increased activity and increased investment in several areas.

Losses have decreased compared to last year.

Key figures by year end

Return on Equity Cost/Income

10,4 10,6

In per cent of Average Assets

11,7

2017 2018 2019 2020 2021

8,6

9,5

Losses on Loans and Guarantees Common Equity Tier 1 Capital (CET1)

Balance sheet and key figures

	31.12.21	31.12.20	Changes
Balance in NOK million			NOK	%
Total Assets	82 797	79 486	3 311	4.2
Loans to customers	69 925	66 850	3 075	4.6
Deposits from customers	41 853	39 023	2 830	7.3
Net Equity and Subordinated Loans	7 390	7 089	301	4.3

Key Figures	31.12.21	31.12.20	Changes p.p.
Return on Equity	9.5	8.6	0.9
Cost/Income ratio	42.2	41.4	0.8
Total Capital	20.9	20.8	0.1
Tier 1 Capital	18.9	18.7	0.2
CET1	17.2	17.0	0.2
Leverage Ratio	7.7	7.7	0.0
Profit per EC (NOK, the Group)	31.10	27.10	4.00
Profit per EC (NOK, the Bank)	30.98	26.83	4.15

MORG – very strong price development (Total Return)

• With a MORG price of NOK 444 at the end of fourth quarter, the price to book ratio has increased from 0.89 as of 31.12.2020 to 1.27 by end of 2021
• As the figure shows, the MORG price has increased by 55.3 per cent during 2021, more than the average growth (51.5 per cent) in the EC-market in the same period (Total Return for the EC-index (OSEEX) consisting of the larger savings banks)
• The CET1-ratio ended at 17.2 per cent by year end

Development at Oslo Stock Exchange YTD (MORG vs. EC-index)

Outlook for the region and the bank

• Unemployment in Møre og Romsdal began to rise in December as a result of the introduction of more comprehensive infection control measures. In the middle of the month, the number registered as fully or partially unemployed, or as participants in various labor market measures, accounted for 3.7 per cent of the labour force. The proportion of completely unemployed was 2.0 per cent. The corresponding unemployment rate for the country as a whole was 2.2 per cent
• It was especially in service industries such as hotels, restaurants, tourism and culture that unemployment rose towards the end of the fourth quarter. These are industries that have also been hit hard by the pandemic in the past. However, when the infection control measures are phased out, the production of services in the county will increase. Unemployment will then eventually fall again towards the level from before the pandemic
• The bank has a solid capital base and strong liquidity and will continue to be a strong and committed supporter for our customers. The focus is always on having good operations and profitability

Financial targets remain unchanged

• Sparebanken Møre's strategic financial performance target is a return on equity exceeding 11 per cent and cent and a cost income ratio below 40 per cent. The activityreducing measures as a result of the corona pandemic have affected the market so that the targets were not reached in 2021
• The Board expects improvement in the target figures and that implemented measures will result in achieved targets in 2022

Results

Total Income

Total income - NOK million

Total income

• % Average Assets

• Total revenues were NOK 380 million in the fourth quarter
• Net interest income was higher than in previous quarters in 2021 and also 6.7 per cent higher than in Q4 2020
• Other income lower compared with the same period last year, but higher excl. financial instruments

Net Interest Income Other Income

Net Interest Income rebounds

• Net Interest Income increased to MNOK 335 in Q4, 6.7 % higher than in Q4 2020
• In the quarter, the bank has inter alia benefitted from the interest rate fixing structure on our market funding and the first interest rate changes on loans and deposits
• We expect a further strengthening of the Net Interest Income in 2022

Net Interest Income - NOK million

Net Interest Income

• % of Average Assets

Quarterly development in Other Income

• The development in the quarter is affected by negative value adjustments on the financial instruments
• Other income, excluding financial instruments, shows a good development and has increased by NOK 8 million (15.1 per cent) compared with the same period last year
• Increased income contribution from guarantee commissions, insurance, fund sales, discretionary portfolio management and real estate contributes to the positive

Other Income - NOK million

18

71

Other Income

• % of Average Assets

Q4 20 Q1 21 Q2 21 Q3 21 Q4 21

Financial Instruments

Increased activity leads to growth in other income

• XX % Discretionary Asset Management 16 %

Savings in funds / securities 36 %

Real Estate Brokerage

9 %

17

Insurance 13 %

Strong Costs control

• Costs in 2021 were NOK 21 million higher than the year before
• The change is mainly related to increased personnel and IT costs as a result of strengthened investment in several areas
• We work purposefully with measures that contribute to increased availability, better service offerings for customers and increased efficiency
• We are experiencing increased demand for advice, and the bank is working targeted with smart use of technology to free up time and resources for advice

Operating Costs - NOK million

Operating Costs

• % of Average Assets

Cost/Income ratio Total Assets and Man Years

• Total Assets in NOK billion

Recruiting

Ledelse kan vise til menneskene som har ansvar for beslutninger og resultater i organisasjoner, og til det å utøve ledelse gjennom å ha innflytelse, påvirke, føre an, gi retning og skape mening i det som skjer i og rundt organisasjonen, slik at det foregår et organisert samarbeid mot felles må

➢ All time high recruitment in 2021

• ✓ 44 advertised positions in the bank
• ✓ 497 applicants
• ✓ 170 interviews
• ✓ 38 new employees

Losses and portfolio quality

• Losses on loans and guarantees are low
• The quarterly accounts are charged with NOK 5 million in losses, which are distributed with NOK 1 million in the corporate market and NOK 4 million in the retail customer segment
• Our portfolio is strong and well diversified
• The level of default is low and there are few bankruptcies

Losses on loans and guarantees

• NOK million

35

Q4-20 Q1-21 Q2-21 Q3-21 Q4-21

Credit impaired committments (net)

-per cent of loans/guarantees

Losses on loans and guarantees

• % of Average Assets

Q4-20 Q1-21 Q2-21 Q3-21 Q4-21

Impairments

• NOK million

ECL on commitments in default above 90 days Individual impairments on other credit-impaired commitments ECL-impairments on loans and guarantees

Losses by sector

Losses on loans and guarantees

• NOK million

Credit-impaired loans

Impairments in % of Credit-impaired Loans and Guarantees

Credit-impaired Loans are loans and guarantees more than 90 days over due and loans with individually assessed impairments.

Per cent of

Credit-impaired

Loans

Results in details

	2021		2020		Changes
Results (NOK million and %)	NOK	%	NOK	%	NOK	p.p.
Net Interest Income	1,266	1.56	1,227	1.57	39	-0.01
Net Income Financial Investments	-23	-0.03	-4	-0.01	-19	-0.02
Gains/losses liquidity portfolio	18	0.02	-4	-0.01	22	0.03
Gains/losses on shares	48	0.06	82	0.11	-34	-0.05
Other Income	218	0.27	206	0.27	12	0.00
Total Other Income	261	0.32	280	0.36	-19	-0.04
Total Income	1,527	1.88	1,507	1.93	20	-0.05
Salaries and wages	360	0.44	337	0.43	23	0.01
Other costs	285	0.36	287	0.37	-2	-0.01
Total operating costs	645	0.80	624	0.80	21	0.00
Profit before losses	882	1.08	883	1.13	-1	-0.05
Losses on loans, guarantees etc	49	0.06	149	0.19	-100	-0.13
Pre-tax profit	833	1.02	734	0.94	99	0.08
Taxes	191	0.24	167	0.21	24	0.03
Profit after tax	642	0.78	567	0.73	75	0.05

Balance sheet

High activity and good growth

• The bank has seen good activity in 2021 and an increasing growth rate in total lending compared with the end of 2020
• Lending growth ended at 4.6 per cent against 4.4 per cent at the end of 2020
• Deposit growth was strong against the end of 2021 and ended at 7.3 per cent
• There is good market activity in the bank and we have gained a record number of new customers in 2021

Loans Deposits

• NOK billion and per cent (y/y) - NOK billion and per cent (y/y)

Customer lending has increased by 4.6 % over the last 12 months.

Deposit growth of 7.3 % over the last 12 months.

High deposit-to-loan ratio of 59.6 %

25

Record number of new customers in 2021

High demand for advisory services

• The bank has never gained as many new customers as in 2021
• A good confirmation of the bank's business model
• Customers value availability and broad competence
• We are experiencing increased demand for advice, and the bank is working purposefully with smart use of technology to free up time and resources for advisory work
• Customers want advice in areas such as financing, savings, asset management and sustainability
• This year we have also launched legal services for private individuals. Through our legal partner Justify, customers can access good digital tools and services

Lending

Retail market Corporate market

• NOK billion and per cent y/y - NOK billion and per cent y/y

• Lending growth ended at 4.6 per cent against 4.4 per cent at the end of 2020

• Lending growth to the retail market ended at 4.3 per cent by year end 2021, while lending growth to the corporate market ended at 5.4 per cent
• Growth has picked up somewhat in both the retail and the corporate markets compared with 2020
• We are working well in the market and we expect good and stable growth going forward

Retail lending has increased by 4.3 % over the last 12 months

Loans to the retail market amount to 67.7 % of total loans

Corporate lending has increased by 5.4 % over the last 12 months

Loans to the corporate market amount to 32.3 % of total loans

Diversified loan book

• The bank has a well-diversified portfolio that reflects the industry distribution in our market area
• We register good activity in most industries in 2021. There is also a strong demand for labour
• There is a high degree of stability between the sectors and growth is spread over several industries
• The level of default is low and the portfolio is robust with low risk

Loans by sector

Other;

Financial services	1.1 %	Other Industry	2.3 %
Building and Construction	1.4 %	Fishing Industry	1.6 %
Retail/wholesale trade	1.5 %	Ship Yards	0.6 %
Agriculture	1.0 %	Other	0.4 %

Good quality in our retail portfolio

• High portion of secured loans and low level of loans in default

• We are close to the customers and enter into dialogue early

• % of total loans

Deviation from Boliglånsforskriften reported in the fourth quarter of 2021 were 9.6 % outside Oslo, and 17.5 % in Oslo

96.3 % of mortgages are within 85 % of LTV

House prices Price per square meter

• Based on pre-owned dwellings sold in June 2021, Norwegian seasonal adjusted house prices decreased by 0.2 per cent in December 2021
• Last twelve months Norwegian house prices have increased in average by 5.2 per cent
• The City of Ålesund and the Mid-Norway region has over time experienced moderate growth in house prices compared to the national average, both indexed development and in price per square meter

Indexed development - January 2015 = 100

2015 2016 2017 2018 2019 2020 2021 2022

• January 2015 –December 2021

Key information (Sold pre-owned dwellings in December 2021)	Norway	Mid Norway	Greater Ålesund	Greater Stavanger	City of Oslo
Seasonal adj. development month	- 0.2 %	+0.6 %	+0.6 %	- 0.2 %	- 0.2 %
Development 12 months	+5.2 %	+7.1 %	+3.7 %	+7.0 %	+2.2 %
Per square meter (NOK)	47 979	37 636	33 203	39 329	84 946
Average days on market	51 days	65 days	97 days	51 days	27 days
Price median dwelling (NOK)	3 550 000	2 950 000	2 760 801	3 506 216	4 770 000

Important area for seafood exports

• In 2021, the exports of seafood from Norway ended at a record high of NOK 120 billion, an increase of 13 per cent from 2020
• Our county, Møre og Romsdal accounts for almost 30 percent of the total seafood exports from Norway
• 15.5 per cent of the bank`s lending volume to corporate customers is related to fisheries
• The bank has its own industry group for Marin, staffed by authorized financial advisers with industry specialization in fisheries, the fishing industry and aquaculture

Low exposure towards Oil Services

1,79 %

Loans to Oil Service EAD* by type of vessel - In per cent of total loans - In NOK million

Expected Credit Losses

(EAD in NOK million)	Loans	Guarantees	Total EAD*	Individually assessed impairments	ECL-IFRS 9	Total	Per cent of EAD
Low Risk (Risk Class A-C)	253	73	326	0	2.6	2.6	0.8 %
Medium Risk (Risk Class D-G)	12	100	112	0	0.2	0.2	0.2 %
High Risk (Risk Class H-M)	208	201	408	0	11.7	11.7	2.9 %
Loans and guarantees with individually assessed impairments	796	105	901	215	-	215.0	23.9 %
Total	1.269	478	1.748	215	14.6	229.6	13.1 %

Deposits

Retail market Corporate and public - NOK billion and per cent y/y - NOK billion and per cent y/y

• Strong deposit development in the corporate market with a growth of 9.8 per cent
• Growth in the retail market also strengthened during the fourth quarter and ended at 5.6 per cent

Retail deposits have increased by 5.6 % over the last 12 months Deposits from the retail market amount to

58.9 % of total deposits

Deposits from corporate and public customers have increased by 9.8 % the last 12 months

Liquidity and Capital

Deposits from customers and market funding – strong rating

Deposits are the Group`s most important source of funding

Sparebanken Møre with good access to the market – diversifying the investor base

• Our deposit-to-loan ratio stood at 59,6 per cent by year end
• Total net market funding ended at NOK 31.8 billion by end of 2021 more than 85 per cent with remaining maturity of more than one year
• Senior Bonds: Weighted average maturity of 2.55 years (FSA defined key figures)
• Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 3.53 years (FSA defined key figures)
• January 2021, Moody`s upgraded the banks rating from A2- stable to A1 with stable outlook. Issuances from Møre Boligkreditt AS are rated Aaa
• The Group's first green market financing was established when Møre Boligkreditt AS entered the euro market on 21 September 2021 with a 5-year semi-benchmark (EUR 250 million inaugural green covered bond). The issue was very well received
• In January this year, Sparebanken Møre further issued its first green senior non preferred bond (SNP) with a first tranche of NOK 1.0 billion of a limit of NOK 1.5 billion. The loan has a maturity of 6 years. Through this issue and with a total of NOK 2.0 billion issued, the bank is well on track with the linear phasing in of the new capital class 35

Strong Capital by year end

CET1 capital in Sparebanken Møre

• % of risk weighted assets

CET1 requirement for Sparebanken Møre

• % of risk weighted assets and excl. management buffer

• CET1 at 17.2 % and Leverage Ratio (LR) at 7.7 % by year end, - the ratios are well above regulatory requirements

• Countercyclical buffer will be increased to 1.5 % 30.06.2022 and further to 2.0 % 31.12.2022. A further increase to 2.5 % has been announced in the first half of 2023
• Systemic risk buffer will be increased from 3.0 % to 4.5 % as of 31.12.2022
• CRD V / CRR 2 is expected to have a positive effect
• The effect of circular 03/2021 from Finanstilsynet (FSA) is not included in the bank's capital calculation
• The bank is solid and well equipped for further growth and development

• By year end, our Common Equity Tier 1 capital stood at 17.2 %, Tier 1 capital at 18.9 % and Total Capital at 20.9 %.
• Sparebanken Møre's capital targets are:
  • Total Capital: Minimum 18.7 %
  • Tier 1 capital: Minimum 16.7 %
  • CET1: Minimum 15.2 %
• The Group's capital adequacy ratio is well above the regulatory capital requirements
• Our capital is calculated according to the IRB Foundation Approach for corporate commitments, IRB Approach for the retail market and the Standardised Approach for other items

Development in CET1

Changes in CET1 from year end 2020

Dividend policy

MORG – price and Price/Book (P/B) value

• Sparebanken Møre aims to achieve financial results providing a good and stable return on the bank's equity capital
• Sparebanken Møre's results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity
• Unless the capital strength dictates otherwise, about 50 per cent of the profit for the year will be distributed as dividends

^{289 303 320 332} 350 262 283 317 296 444 0,91 0,93 0,99 0,89 1,27 2017 2018 2019 2020 2021 Equity per MORG Price P/B

Equity per MORG is calculated on Group figures

Equity Capital in Sparebanken Møre

• The PCCs/ECs of Sparebanken Møre (MORG) have been listed at Oslo Stock Exchange since 1989. Sparebanken Møre was the first Norwegian savings bank to be listed at OSE
• Total EC capital was NOK 989 million by December 2021
• Good Total Return over many years the figure below shows Total Return on MORG vs the broad Oslo Børs index OSEBX since the beginning of 2000
• Planned, proposed dividend from the Board to the General Meeting is NOK 16 per EC for the financial year 2021

Dividend and EC-price

Equity Capital in Sparebanken Møre

About equity certificates (EC)

• Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange
• Equity certificates are an important part of savings banks' capital base and confer ownership of between 14 % and 97 % of the individual bank
• A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or "ownerless" equity, consisting of retained earnings built up by the bank over the years. The other is the certificate-holders' equity, consisting of equity certificate capital and related reserves (equalization reserve and premium account)
• Equity certificates have clear similarities to shares. The main difference is the owners' rights to the bank's assets and influence over the bank's governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank's other capital
• In a limited company, losses hit shareholders' equity directly. In a savings bank, losses are first absorbed by the primary capital and the equalization reserve before hitting the equity certificate capital

Source: The Norwegian Savings Bank Association https://www.sparebankforeningen.no/en/egenkapitalbevis/about-equity-certificates/

Contact

sbm.no facebook.com/sbm.no @sbmno engasjert.sbm.no

CEO Trond Lars Nydal

+47 951 79 977 trond.nydal@sbm.no

Senior Economist (SVP) Finance Runar Sandanger

+47 950 43 660 runar.sandanger@sbm.no

Disclaimer

This presentation has been prepared solely for promotion purposes of Sparebanken Møre. The presentation is intended as general information and should not be construed as an offer to sell or issue financial instruments.

The presentation shall not be reproduced, redistributed, in whole or in part, without the consent and Sparebanken Møre. Sparebanken Møre assumes no liability for any direct or indirect losses or expenses arising from an understanding of and/or use of the presentation. of Sparebanken Møre.